Preparing for business sale negotiations – key points to consider

Ascend business exit planning book
Planning your business exit – what you need to know
November 15, 2018
handshake business sale

When you have found a potential buyer for your business you might want to pop the champagne already, however, that’s usually the point when the selling process can get quite tricky. Additionally to the stress that often comes with negotiations, they can thoroughly distract you from running your business and maximising its growth.

 

Keep the following in mind:

 

Running the business
 should still be your key priority

Don’t forget that the growth of your company will be measured in the sales process. Did you know? A common obstacle to finalising a business sale is missed profit expectations late in the game. How can you assure the potential buyer of the future profits when your turnover is dropping or stagnating?

 

Keep it confidential

Lack of confidentiality among you, your partners and/or your advisors can create problems and mistrust and can threaten all the preparations that you have been doing over the previous few years.

 

Think about the key points
 of the negotiation

Understand the different options that may be available to you. How the purchase will be made — through stock, cash or both — is certainly something to consider, as is the possibility of an earn-out, which sets targets that will be used to evaluate the business success.

Consult with your trusted financial and legal advisor to understand the effects of decisions you might make.

 

Write down a list of how keep your focus

It may sound ridiculous to put together a list of tasks like “get the spouse’s full support” and “delegate whenever possible,” but the pressure of conducting negotiations while you’re trying to run your business and lead a satisfying personal life as well can be very challenging. You will need all the support you can get!

Just like you keep a calendar for your appointments, keep a list that reminds you to do things like making sure your personal phones are unlisted, scheduling regular progress meetings with management, leveraging your trusted advisors and going to the gym a few times a week.

 

What will your future status be?

Perhaps the most interesting question is – your future status. Will you continue to be an owner? Will you suddenly find yourself as an employee? Or will you be leaving the business completely?

You might prefer one particular option, but the potential buyer may have a different preference. E.g. you might want to leave the business in order to enjoy your retirement, but the buyer may need you to stay on-board for a while in order to ensure continuity and a smooth hand-over.

Alternatively, how would you feel about being an employee of a company that now belongs to someone else? It might be quite different to work for someone else again after many years of being your own boss.

 

Food for thought for your business sale

As you can see, there is a lot to think about in the sales process and there are many possibilities regarding what the outcome of negotiations might be. It is best to think through the options beforehand and know what they could mean for you and your business. A financial or legal advisor can help you with getting a head start before the negotiations begin.
At the same time it is important to stay focused on the current business performance and keep increasing its value.

 

If you need any help with these challenges, Ascend Business Partners are experts in helping business owners build their business and supporting them during the sale, exit or transition process. Our Managing Partner, Greg Johnson, is a Certified Practicing Accountant, Certified Exit Planner and Business Broker. Our focus is on creating exceptional personal and business outcomes for business owners by assisting our clients to plan, design and implement their ultimate exit and succession strategy.

 


Contact Ascend Business Partners today on 03 8794 7777 or ascend@ascendpartners.com.au to have a discussion about your business and financial goals. Or simply book a free 1-hour “Time to REFIRE” workshop with Greg!

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