Maximize Your Business Sale: Essential Steps to a Successful Exit

By Mark Eiland | Managing Partner, Eminence M&A Strategies
With introduction by Adam Flagg, CFP®, AIF® | Managing Partner, Senior Wealth Advisor at Collective Advisors

As an entrepreneur and financial advisor, I’ve spent a great deal of time meeting and talking with business owners. There are a few common mistakes that I find business owners make. Still, the worst one is putting all your time and money into the business without a true plan to sell the business and usually not knowing how much the company is worth. Even if you think selling your business may be over a decade away, having a plan and laying the groundwork now will make this process more manageable. I have pursued a certification in Exit Planning, and soon, I will let our supporters know more about this service.

Another firm we enjoy working with here in Austin, Texas – Eminence M&A Strategies – wrote this brilliant article. Eminence M&A Strategies specializes in supporting founder-led businesses with the sale of their privately-held companies. As someone who has personally sold two businesses, what Eminence has laid out below helps you understand the process of selling and the preparation that goes into preparing for a successful transition. Please don’t hesitate to contact Collective Advisors at [email protected] when you are ready to get going. We’ll be happy to get the conversation started with you and Eminence M&A Strategies.

Suppose you’ve decided to sell your business, congratulations! The next steps include taking specific actions to prepare your business for presentation to potential investors in an attractive manner.

You may have heard the expression, “You never get a second chance to make a first impression.” That is very true when discussing presenting your business to a prospective investor. An investor’s decision-making process involves thoroughly analyzing certain key factors and attributes of the business. Preparing for such an analysis will enhance the investor’s confidence in the acquisition opportunity.

Preparing your business for a sale takes time and effort, so starting the process well in advance is essential. Here’s a general roadmap to help guide you:

Determine Your Objectives

  • Decide whether you want to sell the entire business or consider alternative options like selling a partial stake or seeking a merger.
  • Set your desired timeline for the sale and consider any specific conditions or requirements you have for the transaction.
  • Clarify your goals and motivations for selling the business.
  • Determine financial expectations, post-sale involvement, and any specific criteria for potential buyers.

Financial Preparation

  • Collect and arrange key financial documents: income statements, balance sheets, cash flow statements, tax returns, and related records.
  • Confirm that financial statements are current, clear, accurate reflections of your business’s financial status and performance. Seeking guidance from an accountant or financial advisor is recommended to ensure accuracy.
  • Identify areas where you can improve profitability and cash flow and minimize unnecessary expenses before selling.
  • Identify and resolve outstanding debts, liabilities, or legal issues before selling.

Conduct a Business Valuation

  • Hire a professional business appraiser or valuation expert to assess your business’s value objectively.
  • Work with them to review your financial records, assets, market position, growth potential, and other factors impacting your business’s value.
  • Use the valuation as a starting point for setting an asking price, negotiating with potential buyers, and determining the terms of the sale.

Operational Preparation

  • Enhance operations to boost appeal to buyers. Find cost-cutting opportunities, increase productivity, and fix operational weaknesses.
  • Ensure you have capable managers for smooth daily operations. This reassures buyers about successful post-acquisition continuity.
  • Document processes and procedures to ensure a smooth transition for the buyer.
  • Identify and address any potential risks or vulnerabilities in the business, such as crucial customer dependencies or supplier contracts.

Asset and Intellectual Property Evaluation

  • Identify and document your business’s tangible and intangible assets, including real estate, equipment, patents, trademarks, copyrights, and proprietary technology. Ensure ownership and legal rights are clear and well-documented.

Legal and Compliance

  • Review and update all contracts, leases, and agreements. Ensure they are current, enforceable, and assignable to a new owner.
  • Address any compliance issues or regulatory requirements specific to your industry. This includes licenses, permits, certifications, and environmental compliance.
  • Resolve any pending or potential legal disputes or issues that may negatively impact the sale.

Team and Advisory Support

  • Engage a team of professionals with merger and acquisition (M&A) expertise to support you throughout the sale process, including an M&A advisor, attorney, accountant, and potentially other specialists depending on your unique needs.
  • Consult with a tax advisor to understand the tax implications of the sale and explore strategies to minimize tax liabilities.

Pre-Sale Due Diligence

  • Conduct your own due diligence on your business to identify potential issues or concerns that may arise during the buyer’s due diligence process.
  • Compile all relevant documents, contracts, financial statements, and other records that potential buyers may request during due diligence.
  • Proactively anticipate the questions and concerns that buyers may have and prepare thoughtful, comprehensive responses to address them.

Confidentiality and Planning:

  • Maintain strict confidentiality throughout the sale process to protect sensitive business information.
  • Proactively develop an exit strategy and a detailed transition plan for the new owner.
  • Anticipate effects on staff, customers, and suppliers, then address concerns. A solid transition plan improves business appeal to buyers.

Selling a business can be complex and time-consuming, requiring careful planning, preparation, diligence, and professional support. It’s advisable to work closely with professionals who specialize in mergers and acquisitions (M&A) that can significantly streamline the process and guide you through the various stages to increase the likelihood of maximizing the value of a successful transaction.

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