Preparing a business for sale doesn’t have to drag it down

There comes a time when after years of effort, you want to cash out on the work you have put into a business. In order for a sale to succeed there are several steps required.

Owners looking to sell need to focus on making sure the business is in the best place for sale rather than overly fixating on when to sell. To do this, preparation is the true determinant of success irrespective of the when. By focusing on where value is created and how your business can look best in that respect, timing won’t disappear as a factor, but it will be reduced substantially in importance.

This is why getting the basics right is so important. Many deals falter due to mishaps with the core fundamentals that can reduce buyer confidence.

Showing that you are prepared sends clear positive signals to prospective buyers. The greater the foundation, the more a business appears scalable. Remember, the buyer will want to gain value after the sale and having the i’s dotted and t’s crossed will be viewed as a positive indicator for growth potential. This isn’t just about comfort for the buyer; it’s about recognising value as they won’t have to do as much work fixing things to run smoothly post-acquisition.

That’s important when it comes to the ‘when’ of selling. The time you put into being ready to sell is far more important than the time you actually sell. You need to be realistic in this regard as matters such as regulatory approval or the views of other shareholders must be factored in.

Preparation is crucial to the step that matters most to sellers, putting a price on the business. Put yourself in the shoes of the buyer, they are going to value certainty a lot higher than potential.

This is where all the preparation work truly begins to pay off as buyers will certainly find a seller that has done their homework more attractive. This is the beauty of a lengthy preparation phase. You can get to know your own business more as an asset than as something you have worked on. Preparation becomes a value creation phase in its own right. The earlier you start, the more it pays off.

All of this work is enabling you, as the seller, to lessen the worst impacts of your emotional attachment to a business. Nobody will ever know your business like you do and having that attachment is a good thing, it has likely contributed to its success.

It can, however, blind sellers to what is needed for the sale of the business to succeed. Putting in the hard work helps them to think more like the buyer and adapt accordingly.

The preparation element isn’t only about ensuring the valuation of the business is improved, it’s also about reducing the stress on the seller during the sales process. While that process is underway, there’s the not so insignificant matter of still having to run the company’s day-to-day operation.

By having the due diligence process done over a manageable timeframe leading up to the sale, rather than once the sales process begins, it can ensure the leadership’s bandwidth isn’t overstretched.

Who you leave behind after the sale matters as much as the what. Your flexibility in exiting following a sale is impacted by how deep your leadership team is and how dependent the company is on ownership at an executive level.

If all of this sounds like a lot of work for something that might not even happen, consider the following. You may not be considering a sale, but you may get a cold approach that merits your attention.

If you have put the requisite work in, then you will know how fair an approach that is and how best to consider it. Being prepared for sale is, even when not planning for one, a matter of good governance in its own right.

Content adapted from Irish Times Special Report - Merger & Acquisitions.