People often over-complicate the process of selling businesses. They end up tangled in knots trying to navigate the art of dealmaking or the science of valuation in a bid to negotiate a great business sale outcome and lose focus on three factors that, in our view, are integral to achieving excellent business sale outcomes.
This article aims to take business sales back to its simplest form and considers the three best ways to secure a great sale result for your business.
1. Maintain Confidentiality
Business sales are a challenging time whereby commercially sensitive business information needs to be guarded from competitors, staff, customers and suppliers. At the same time, potential buyers will not be in a position to investigate the investment opportunity without access to key information about your business.
Should the sale of your business become public the impact might be immeasurable, extending to the resignation of key staff or even the loss of suppliers or customers. This will not only affect the saleability of your business, but also have a negative effect on your business’ future performance.
Brokers and transaction advisors play the key role in managing confidentiality throughout the sale process. As part of this, they can ensure that prospective buyers are thoroughly qualified and vetted, and that all prospective buyers agree to confidentiality terms before the identity of your business is released.
2. Be Flexible With Payment and Transactional Terms
Most business sellers want to receive the entire sale price of their business on settlement. Further, most business owners will have some idea of key contract terms that they would like to have incorporated into the sale.
Often though, it is helpful for business sellers to explore creative ways that may help them realise a higher sale price. One option is to consider negotiating an earn-out arrangement. Such arrangement shifts some of the risk of the purchase back to you as the seller. However, buyers are likely to pay more for your business to receive this privilege.
Further, sellers are wise to identify what contractual terms are important to them and where they may have the ability to be more flexible. Doing so can enable a skilful negotiator to make concessions on contract terms that are of value to a buyer but have little importance to a seller with the result being a higher sale price than would otherwise be achieved.
3. Generate Competitive Tension
A lack of interested buyers for a business places downward pressure on the sale price and leads to unfavourable transactional terms.
The simplest way to increase the sale price for your business is to have multiple interested buyers, all bidding to secure your business. This will also have the effect of ensuring a speedy sale process, minimising the time, effort and money invested into completing the sale of your business.
A comprehensive and proactive approach to the sale of your business, whereby many potential buyers are sought out and approached will bring a greater number of interested parties to the table and ultimately help maximise the final sale price.
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Groves & Partners are expert business transaction advisors and valuers, with significant experience in executing successful business sales for our clients.