IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog has been provided by Kayleigh Alexandra of Micro Startup (www.microstartups.org).
How to Prepare Yourself for Your First Business Sale
Selling a business isn’t easy at the best of times — there are many tricky factors that play into a transaction of that size, and even expert sellers must do time-intensive due diligence — so it’s no surprise that it’s an intimidating prospect to anyone who has never done it before. Even the smallest mistake can massively change the course of a career, with success meaning new opportunities and failure leading to a loss of credibility and a tarnished image.
Because of this, it’s extremely important to be maximally prepared before trying to sell a business. In this article, we’re going to cover how you can achieve that level of preparation, going through various actions you can take to get ready to make your first sale a success.
Learn about the Prospective Buyers
Different people value different things, so a one-size-fits-all approach to the sales process will never work. What is it about your business that may appeal to people? One interested party may be primarily attracted to the physical location, while another might see a lot of value in the staff, and another still could want the company for the rights it holds.
It’s worth asking yourself at this point how invested you are in the future of the business once you’ve sold it. If you built the business from the ground up (or you have another emotional attachment), you might want to see it continue in its current configuration even once you’ve sold it. If so, that should inform how you represent it in negotiations. If you don’t really care what happens to it once you’ve made a profit, then you can present it in whichever way you think will make you the most money.
Polish your Sales Pitch
Regardless of the specific reasons for which any party might value your business, it will have a large array of near-objective positives and negatives. For example, it might have a spotless financial record and an impressive set of valuable legacy clients, but premises that are barely fit for purpose and exorbitant overheads. To paint the business in the best possible light, you need to understand all of its advantages and disadvantages (start by carrying out a SWOT analysis) so that you might best showcase the former and downplay the latter.
If you’ve run the business in question for quite some time, you might think that you’d know all of this already, but that isn’t necessarily the case. Firstly, you’re likely to have a biased perspective of the situation — an office area that feels welcoming and homely to you might well seem very off putting and unpleasant to those not accustomed to it. Secondly, there’s a difference between being aware of something and being able to articulate it in a way that will make sense and prove compelling to someone who knows nothing about the business.
Cultivate a Sales-Friendly Mindset
Having a positive attitude, being well, and feeling formidable — each of these things will prove helpful during the process of making your first business sale. After all, you’re likely to be nervous throughout, even if you have some assistance. You may find yourself challenged on a particular point unexpectedly, or asked to make a concession you didn’t anticipate needing to make.
Start by ensuring that you’re getting enough sleep, eating sensibly, and exercising. The worse you feel about yourself, the more likely you are to overreact to an innocuous question and end up pushing away a promising prospective buyer. Remember how important it is to be personable in face-to-face interactions — I listen to various self-improvement podcasts, and the following line from an episode of the Optimized Geek stuck out to me last month:
“The secret to success is likeability rather than high status” – Mitch Prinstein
Barring the unlikely situation of selling a business with zero human interaction (which is still very uncommon, despite the possibilities afforded by the internet), you’ll have to speak to possible buyers at some point, and however much you want to focus on the things you consider important (such as the state of the business and the terms of the deal), how you come across as a person (even something as trivial as your clothing) will affect how people perceive the value of your business.
Plan your First Post-Sale Steps
It may seem odd — and rather presumptuous — to think too much about what you’ll do once you’ve made your first business sale, but it’s a valuable option because it stops you dwelling too much on the possibility of everything going disastrously wrong. Furthermore, if you view completion of the sale as some final barrier to be overcome, you won’t be adequately prepared for what comes next, which will increase your anxiety as you try to close the deal.
Plot out the steps you’ll take once the sale has been completed. Will you take a break to enjoy the occasion before getting back to business? Try to build on the professional momentum by looking to invest the proceeds in your next venture? Perhaps you have debts that need paying off, in which case you can calculate how much you’ll need to set aside once the exchange has been made. Looking to the next phase of your life will take some of the pressure off the situation and allow you to be more comfortable in negotiations.
Consult a Brokerage Firm
Most often, the best way to learn about how to do something is to consult people who do it at a professional level. If you contact IBA, you can get your most pressing questions answered, and learn about the most important elements of the process of selling a business.
The first business sale is a momentous milestone for any entrepreneur — get it right and you gain a lot of professional momentum, but get it wrong and you’ll lose a lot of progress. Try these tips for preparing yourself to make your first business sale, and if you need some additional advice, reach out to IBA today. Good luck!
If you have questions relating to this article Kayleight Alexandra can be reached at (408) 457-9552 or kayleigh@microstartups.org.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.