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How did you sell your small business?
For those of you who have sold a small business ($1 to $5 million);
1. How did you position it for sale? (internal, marketing, etc.)
2. How did you target the potential buyer groups? (client, holding company, individual buyer, etc.)
3. How did you maximize value/price?
4. What external support roles did you use that really paid off? (accountants, business sales people, attorneys, etc.)
5. How long did it take from start to end?
6. What cautions and "must do's" would you suggest?
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2 Answers
Chad: its a huge question and entire books have been written on the subject, but here's a couple of answers to your questions:
1. I would recommend hiring a boutique mergers and acquisition professional. Go to the AM&AA website to find one near you. Like a real estate agent knows how to dress up your house, their job is to figure out how to position your firm
2. again, I would let you M&A advisor come up with the potential buyer list but you can certainly make suggestions. The list will likely include some financial buyers (e.g. private equity people) and some "strategic" buyers (usually companies adjacent t yours (an indirect competitor, supplier or industry peer); you may also want to consider a management buyout if your managers are strong and you,re willing to get your money over time.
3. some drives of price are (in order):
a) recurring revenue in the form of contracts or subscription
b) positive cash flow
c) defendable niche
4. I'd use a boutique M&A firm and expect to pay around 5% of the total sale price. You will also have accounting and legal fees (make sure you use a "deal" lawyer also known as a corporate lawyer (rarely the same person you use for other legal matters)
5). Can very but expect at least 6 months from the time your business is ready to sell (all the ducks in a row) to the day you get a check.
6. Don't do it yourself (get M&A person), keep running your business during the process
good luck
Hi,
I'll try to answer some of these questions for you...
1) I decided that the best approach was to market the business however all of the commercial agents that I spoke to wanted to charge a fee upfront - I never work that way because I like to pay for results so I didn't proceed in that way.
3) I worked hard to build equity in my business. What I mean by that is I ensured that I had a robust business model based around subscription based pricing. This way, any prospective purchaser could easily predict current and future revenues and this provided a more attractive proposition. Additionally, having some exclusive contracts in place was another real bonus.
4 & 5) My accountant approached my closest competitor and it all took about three weeks from start to end.
6) Have a clear idea as to what the true value of your business is. Build as much equity into the business as possible as quickly as possible. Remember that any prospective buyer will at some point ask themselves "If instead of buying this business I just start up on my own nearby, what are the chances of success?".
If you get a chance, have a read of an article I've linked to below. It looks at the prospective purchase of a business from the buyer's perspective and may provide some additional insights.
http://www.mybusinesscoach.org.uk/blog/51-i-have-the-opportunity-to-acquire-a...
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