As a business owner, you too need to be prepared when opportunity strikes. The two most common reasons owners sell their business are getting approached with an unsolicited offer and having a health scare. Either way you’re not in control of the timing, but you can be in control of how prepared you’ll be when opportunity knocks or necessity strikes. Here’s 7 things to do right now to get your business ready to sell
1. Make sure your customer contracts include a “survivor clause,” stipulating that the obligations of the contract “survive” the change of ownership of your company. That way, your customers can’t use the sale of your company to wiggle out of their commitments to your business.
2. Cultivate a group of a dozen “reference-able” customers that an acquirer could interview. When you sell, the buyer will want to speak with your customers; so you need a group of people – customers who are also friends – that would be willing to say good things about your company. In particular, the acquirer will be looking for assurance that the customer will keep buying after you leave, so make sure your reference-able customers are loyal not just to you but also to your business.
3. Keep in mind your elevator pitch to a potential acquirer. Writing your elevator pitch now will crystallize the important attributes of your company and ensure you focus on the right metrics in the coming years. It should the Who, What, Where When and Why of your business:
- Who: describe why your management team is a winner.
- What: describe what you sell and why customers choose you.
- Where: where are you located and what is the potential to expand geographically?
- When: how long have you been in business?
- Why: What are the strategic reasons someone would want to buy your company? Do you have a niche? Is your product a world-beater? Make decisions for your business now through the lens of how the results of your decisions would be perceived by a potential acquirer down the road
4. Identify 10 companies with a strategic reason to buy your business. Once you have a short list of potential buyers, study their M&A activity. What do they buy? What do they list as the strategic reasons for their acquisition in their media releases? Who are their lead corporate development executives?
5. Do business with your short list. Once you have a short list of potential acquirers, try to do business with as many of them as you can. Companies buy companies they know; so if you can find a way to work with a potential acquirer (either as a partner, supplier or customer) it’s a chance for them to become familiar with your company.
6. Professionalise your financial management – there’s nothing that freaks a buyer out more quickly than disorganised accounts.
7. Stop doing the selling. If you’re the rainmaker, nobody will buy your business without a soul-crushing earn out. Keep in mind that sales people take time to train and to hit their stride. Depending on your industry, it may take them a year or even two to start cranking out deals, so now is the time to hire and train them – not six months before you want out.