Phase 1:

The Decision

If you’re getting ready to sell your privately owned middle-market business, then you’ll  want to consider more than the selling price. Two out of every three middle-market business sales fail to close because those businesses shouldn’t be on the market. They’re simply not prepared for a sale or were given poor advice about selling.

Preparation for selling a business involves two fronts:

  • The psychological or emotional conditions surrounding the sale for the owner and other stakeholders.
  • The practical or tactical side of cleaning up a business, which includes accounting, IT, records, contracts, etc.

Selling a business that you’ve owned and managed for years is not easy, and being “of retirement age” is not in and of itself a reason to sell. However, it is a reason to prepare or an eventual sale. We’ve helped people in their 70’s who decided to keep their businesses and 72-year-olds whom we’ve helped to acquire new businesses. We’ve also helped people in their 40’s or 50’s who wanted to grow the business faster and found the best way to do that was to grow it under the roof of a larger company.

Reasons differ from one individual to the next, be it age, boredom, need for new challenges, family issues, partner/shareholder relationships or a combination of other factors all play a role. Simply stated, knowing why you want to sell your business is as important as knowing how. The following section focuses on the psychological and emotional aspects of selling a business, and on the questions we’ll ask you when we first meet.

Questions to Answer Before Selling a Business

Your answers to these questions will help us, as your M&A Advisors, to better understand which buyers will be the best fit, as well as establishing the optimum timeline for selling.

More importantly, the answers to these questions will enable you to see your own readiness to sell. First, answer these questions from your own personal perspective.

  1. Why do you want to sell? It’s the most obvious, yet often most difficult question to answer. There’s no perfect answer, only the answer that’s true for you.
  1. What will you do when you sell the business? Having a plan for what you’ll do after the sale will help the sales process and keep you motivated. Do you want to stay involved or exit completely?
  1. What is the biggest reason you would NOT sell? We’ll ask you this question to ensure that we’re not marketing to buyers who aren’t a good fit.
  1. What concerns do you have about the future of the business? For example, you might want to see it continue to grow, or you’re concerned that it will evolve into obscurity.
  1. What do you like most about the business? Sometimes, answering this question leads the business owner to conclude that he or she would rather keep the business.
  1. What do you like least about the business? This gives us clues into other reasons you might want to sell your business.

Now, answer these questions after discussions with the other owners and your key management team:

  1. What do suppliers and/or customers have to gain or lose from the sale? For example, you may have been giving certain suppliers preference or giving customers below market pricing, which might cause them to oppose the sale.
  1. What do current employees stand to gain or lose from the sale? We have seen deals fail because one or more non-owners saw a more personal gain in the failure than in the sale, and consequently sabotaged the deal for their benefit.
  1. What do people close to you think about the sale? This includes your spouse, family, and friends.
  1. Are there other groups, such as lawyers, bankers, accountants, and other professionals who might be affected by the sale? Quite often, your stakeholder group extends well beyond the owners, and their input and influence can help or hinder a sale.

Finally, once you’ve got a good handle on your reasons for selling and the concerns of other stakeholders, you’ll want to create a list of all concerns you have about selling the business.

This list might include:

  • The selling price…
  • Selling terms…
  • Ongoing success of the business…
  • Continued employment of current staff…
  • Your continuing role in the business…
  • And the ongoing relationship of the business with your customers and suppliers…

By considering these questions up front, you’ll know the best time to sell your business, as well as the conditions under which you will most likely accept an offer. You’ll also give us, your M&A Advisors, valuable information for pursuing buyers who are a fit for your criteria.