The industries are filled with wealthy investors, and if your business is running well or showing some profitable prospects, a lot of them might want to buy your business. Usually, in these cases, you will receive an email or phone call, and someone will tell you that they want to acquire your business. While it might feel very tempting at that instant, as your business’s true value is finally being noticed by potential buyers, you also need to consider if your business is ready for selling yet. Buy it can be a good offer too, and you might miss out on a bigger chunk. Quite naturally, there is a conflict of decision in mind, and that can lead to panic.
Instead of panicking at the moment, you are required to embark on a strategic preparation that allows you to make the right decision for the selling offer. Here’s a step-by-step guide for you.
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“Too Late to Prepare”
It is definitely a myth when people say it’s too late to prepare, as you can always make changes to your business that improve the value for your company in the buyer’s perception. You cannot rebuild your business in a short time, but you can reduce the factors of the buyer’s perceived risk. When your business looks less risky, buyers will be more confident to pay a handsome value that you deserve. You can further negotiate if required.
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One Move is Enough
There is only one move to focus on, and that is documentation. Remember, buyers are not just taking your revenue, but they are buying a complete system to run the business operation. Starting from the supply chain to daily decisions, if everything is oriented with you, they might see it as a risk. You need to provide a clear roadmap to buyers that includes key relations and contacts, daily business operations, recurring tasks, deadlines, and everything that they need to run the business seamlessly, and that is why documentation is very important.
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Check “Is It Fair?”
It is highly important to check if the buyer is offering you a fair deal or not, and you need to get clarity with a business valuation tool. You also need to compare multiples for typical revenue, and the offer must not go below average. Make sure to evaluate the structure of payment as it is not just about price, but also when and how you are getting paid for the completely ready business. It is recommended to talk to an expert first, whether a CPA or a CFO.
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Keep an Eye on Contracts
Contracts are the biggest assets for a business, and you should have formal contracts with your top clients. Even if you provide just one page of Terms & Conditions to the buyers, they are more confident about the fact that revenue income is prominent after their acquisition. Make sure that your contracts outline the elements like pricing terms, renewal expectations, scope of services, etc, that showcase the stability, scalability, and profitability of your business.
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Your Exit Strategy
In most cases, the buyers won't wait, and you need to have a concrete exit plan. Create your exit timeline with key milestones while running a complete health checkup for your business. Document the critical processes that you handle so that processes are taken care of well when you are not a part of them anymore. Make sure to update your financials to have a clear record. With the help of a CFO, you can compress the timeline.
Panic is the biggest deal-breaker, and you need to stay calm and composed with your strategies to make your exit plan successful and profitable for everyone.
