As a business owner, it is almost inevitable that you will face a time (or a few times) when you will consider or have the opportunity to sell your company. This can be a difficult choice to make, and it’s important that this decision is not made in haste.
My current company, Vocalocity, is the sixth business that I have helped to start or grow, giving me decades of experience in buying, selling, and integrating companies. Throughout the years, I have had many successes as well as many situations that didn’t go as I had hoped—the latter being more than I would like to think about. Based upon my experiences as both a buyer and a seller, I would like to share with you my dos and don’ts checklist for selling a company.
Don’t let emotional attachment to your business drive your decision. For many of us, our business is like our baby. We birthed it. We nurtured it. We poured our souls into it to help it grow. Because of that, sometimes it’s hard to imagine someone else taking over. Like all good business decisions, you must approach the sale of a business with objective reasoning, leaving all emotional ties behind.
Do let other, non-emotional drivers determine your decision. It’s important to consider key questions before making the decision to sell your business. What’s your competition landscape currently like? What’s the state of your firm’s financial outlook, as well as the state of the economy? Personally, consider where you are in your career. Are you ready for a change? Do you want to enter another venture? Do you want to retire? The answer to these questions will not only help you decide whether you should sell, but it will also help you decide what the terms of the sale should be.
Don’t consider just one party. Looking at any major decision through a single lens can lead to a decision you regret later. Consider the many parties that will be affected by your decision.
Do consider all constituents. This means your employees, your shareholders, your customers… and you.
Don’t sell during extreme turmoil. This is part of not letting emotions determine your factor. If you’re selling just because times are hard, this could lead to you not getting an optimal outcome for your business. You may need to commit to one more heroic effort to position yourself for a lucrative outcome.
Do ensure your house is in order. Make sure your company’s financials are in order. When I think about financial statements, I like to set the standard as “squeaky clean.” It means that if a third party went deep into auditing your books, there would be no surprises. Your accountants and financial advisors should be able to give you honest and candid feedback on where you stand relating to this “squeaky clean” standard.
Don’t do it alone. Every one of us is limited based upon our experiences and our inability to see beyond ourselves. A successful business leader often believes he or she is the ultimate and final say. However, it’s important to understand that selling a company is new ground, and an advisor may have far more expertise and objectivity. Therefore…
Do hire an advisor. If you don’t have legal and financial advice that far surpasses what you have, you have an advisor problem and are doing without expertise that can be very beneficial. I have had many successes because I was fortunate enough to receive sound counsel from people who had been through things that I was just starting to go through. If you don’t feel like your advisors are offering sound counsel derived from expertise and experience, you should make a change.
Don’t linger on the decision. Once you have made a decision, you have to move on. I have seen many a business get bogged down in the sale process, causing them to take their eye off of the ball and fail to execute. The sale ends up not closing; the business is in shambles; key employees have left, and there is a mess to clean up.
Do move on the sale once the decision is made. Pushing on timeframes to close becomes a key part of the seller’s responsibility, once a sell decision is made. There are many things an owner can do to compress the timeline, and it needs to be a daily focus.
Don’t just build your company to sell. Great companies are bought, never sold. If you work hard to build a good value proposition, always do what you say and really exceed customer expectations, good things will happen. Business owners who take shortcuts are always sorry.
Do sell…if it’s right. Business ownership is awesome, but for many of us it can be all-consuming. Freeing up time to spend with family and pursue passions can be very liberating. And keeping these dos and don’ts in mind can help ensure your liberating decision doesn’t turn into a decision you regret.
