Key Steps to Consider Before Selling Your Business

Key Steps to Consider Before Selling Your Business

Vehicles are not like businesses. Most cars on the road will be sold, again and again, until they end up as components. Founders are typically where a company begins and ends.

A modest, reliable business will occasionally be sold to a sole proprietor, typically for more money than the estimated annual profit. It's an investment in future revenue flows, but it can be risky because, unlike a car, you can't test drive a company, and they typically require more maintenance than just a yearly tune-up and trip to the charging station.

As shocking as it may sound, the market for secondhand businesses isn't as effective or dependable as the one for used automobiles.

The person who wants to acquire and run a used business is uncommon and frequently lacks access to sizable funding.

The company sales we hear about are typically more strategic, with the buyer assuming that the acquired company will have a positive synergy (1 + 1 = 3) with their current operations. It's possible that the buyer has a sales force, funding, processes, or organizational structures that will make the combination of the companies far more successful than either one would be on its own.

Consider the assets you've built as one angle on this. They might consist of:

Software, patents, and private systems

Equipment, leases, stock, and other quantifiable assets
the reputation of a brand (including shelf space at retailers)
Assets with permission (which prospects and customers want to hear from you)
qualified, devoted personnel

Some of these are elusive, but items like:

Low-drama, dependable turnkey business approach
network effect: tested and effective
forward motion (the idea that tomorrow is almost always better than yesterday around here)

Competition risk (most big acquirers are simply finding it easier to buy a competitor than compete with them)

Investors should be told that an acquisition is free if the dilution from buying a firm is less than the increase in stock price. For more information, see Cisco's past.)

When a large company's rivals join a new market, one approach to accelerate the company's progress is by purchasing a smaller player in that market.
Some of these things can be anticipated and slowly constructed. Others are obvious after the event, but they are more chance-based than deliberate.

The fact that a company has investors and board members who have done this before may be the best single predictor as to whether it will be taken into consideration for a strategic acquisition. The circumstances for these acquisitions to get put on the agenda frequently require cultural fit and a shared reality distortion field because they are rarely just rational spreadsheet calculations.

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