Is it Time to Sell Your Business?
By Tim Leonard
When you first started your business, you may not have imagined ever reaching the stage where you would be able to sell it, and making that decision can be a complex and emotional process. But deciding to sell is also an opportunity to cash in on your hard work and move on to new opportunities. Whether you’re looking to retire or pursue a new venture, selling your business can provide a significant financial windfall and allow you to realize your goals. In this article, we’ll explore seven tips that can help you sell your business and maximize your profits.
Know What You Want
The clearer you are about what you want from the outcome of the sale process, the better the outcome and selling experience. Ensure that you have a firm concept of the price, vendor financing of the purchase price, potential employee severance obligations, property lease assignment/transfers, and post-sale employment. Before you sell your business, determine the ideal post-sale working relationship you would like to have with the buyer. For example, you may want to continue or the buyer may require you to continue working after the sale for a number of years in a full-time or part-time role. So you need to be clear with what your ideal arrangement is.
Know What Buyers Want
The first step in a successful sale is to understand what buyers want. Most potential buyers will be looking for a business with a strong and stable financial track record, a loyal customer base, and long-term growth potential. You should be able to demonstrate a history of solid sales and a mix of revenue sources. Buyers also want to see that there’s room to improve your business and make it even more profitable in the future. Understanding what sells is an essential part of tailoring your sales pitch and finding the right buyer for your business.
Analyze Your Business
Next, you’ll want to be prepared with exactly where your business stands (and how it can be improved) before entering into negotiations. Complete a detailed analysis of your business’s strengths, weaknesses, opportunities, and threats (SWOT) in order to identify the selling points that can be highlighted in negotiations, and any areas that need to be fixed prior to the sale. Don’t stop there, though. Consider getting your staff involved, surveying your clients, and researching what your competitors are doing to have a comprehensive view of your business and how it stacks up against other businesses in the market.
Plan to Take Action
After identifying areas of improvement using the SWOT analysis, you can develop key areas that will enhance your business’s value. You may decide to make administrative processes more efficient to strategically expand your product line, or you may reduce overhead expenses and streamline operations to make your business more profitable. Whichever area you choose to focus on, write down your objectives, assign responsibilities, and set target dates. In the lead-up to a sale, these changes will likely become your high priorities.
Keep in mind that it’s also important to consider any potential liabilities or risks that could negatively impact your business value. This might include legal or financial issues, environmental concerns, or other factors that could impact your business’s long-term viability. By identifying and addressing these issues early on, you can make a plan to mitigate any potential risks and ensure your business is attractive to prospective buyers.
Get Your Paperwork in Order
When a buyer asks for specific details about your business, it’s important to have accurate information at your fingertips. If you can’t produce information or documentation readily, it may come across as unorganized and raise red flags in the buyer’s mind. The documents you’ll need will vary depending on your business, but they may include:
Corporate financial statements
Leases and service contracts
Keep all your paperwork accurate, up to date, and easily accessible. Organize your documents in a way that’s easy to navigate and be sure all relevant parties have signed and dated any necessary agreements. This can help streamline the sales process and provide potential buyers with the information they need to make an informed decision.
Prepare a Sales Presentation
Having accurate information is just one part of the sales process. You must also be able to persuasively and succinctly present the qualitative and quantitative features that set your business apart. Develop a sales presentation that outlines your most important selling points—like customer loyalty and repeat business, for example—and concisely explains the details of your profit and loss.
Your sales presentation should explain your unique value proposition so buyers understand why your business is a better prospect than other investment opportunities. Don’t be afraid to rehearse this presentation to the point where it feels like second nature to discuss the top features of your business.
Assemble the Right Team
Professional advice can help you identify value in your business that you may have overlooked otherwise. It will also provide a third-party perspective and keep negotiations as calm as possible. Consider putting together an experienced team that may include:
Chartered Professional Accountant: A Chartered Professional Accountant can help you prepare financial statements and tax returns, as well as provide guidance on tax implications of the sale.
Business Attorney: An attorney can help you navigate legal issues related to the sale, including drafting contracts and agreements, reviewing lease agreements, and ensuring compliance with all relevant laws and regulations.
Succession Coach: A succession coach can help you plan for the transition of your business and verify the new owner is set up for success.
Chartered Business Valuator: A Chartered Business Valuator can provide an independent assessment of your business’s value, which can help you set a realistic asking price and negotiate with potential buyers. They can also help you identify areas where you can improve your business’s value, as well as any potential risks or liabilities that could impact the sale.
Financial Advisor: A financial advisor can help you manage and invest the proceeds from the sale of your business and create a comprehensive financial plan that includes cash flow and cost management, insurance analysis, and proactive tax planning.
Are You Ready to Sell Your Business?
If you’re a successful business owner thinking about selling your business, the Lifecycle Wealth team is here to help. We are dedicated to helping affluent Canadians keep more of what they’ve earned through custom investment strategies and creative tax planning. With decades of experience, we can help you navigate the financial aspects of selling your business. To learn more about your options, call 416-792-2333 or email firstname.lastname@example.org today!
Tim Leonard is an investment advisor at Mandeville Private Client Inc., providing private and alternative fund solutions in addition to public investments to high-net-worth professionals and business owners in Ontario, Canada. Tim uses his over 40 years of experience to develop and implement the Lifecycle Wealth Plan, using appropriate and customized investment tools to help business owners create more wealth by paying less tax at each stage of life. His desire is to see his clients save tax, fund their lifestyle, and build their legacy—all through proactive planning. Tim and the Lifecycle Wealth team specialize in understanding the various tax rules exclusive to business owners and building a plan with both standard and unique investment, insurance, and personal financing products tailored to their needs, goals, and situations. Tim wants his clients to sleep better at night, knowing they’re on the right path and have a team of professionals advocating for them no matter what comes their way.
Tim has a Bachelor of Arts from Western University and a degree in commerce, accounting, and finance from the University of Windsor. While his favorite thing to do is help people excel financially, Tim also enjoys a good game of golf. He’s a member of the Whistle Bear Golf Club and is the chair of the Stratford Chefs School’s finance committee. To learn more about Tim, connect with him on LinkedIn.
This publication contains the opinion of the writer. The information contained herein was obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made by the writer, Mandeville or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any securities. The information in this publication is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice. Many factors unknown to us may affect the applicability of any statement or comment made in this publication to your particular circumstances. Hence, you should not rely on the information in this publication for investment, financial, legal tax or accounting advice. You should consult your financial advisor or other professionals before acting on any information in this communication.