Questions to Consider Before Selling
The decision to sell your most valuable asset does not happen overnight. If you’re considering the eventual sale of your business, take the time to ask yourself a few important questions. The answers may provide you with insight on whether or not you’re truly ready for an exit.
What are my objectives for selling?
There are a many paths that lead to exploring an exit. You may be nearing retirement, or in the midst of a mandated lifestyle change. Widespread change and consolidation across the data center sector have also made it difficult to overlook the attractive market conditions for sellers. Whatever your reasons, before jumping into the decision to sell, do some soul searching to evaluate why you are pursuing a sale. The more emotionally prepared you are, the greater chance you’ll have for a successful exit.
Is my business sale-ready?
Being mentally prepared to sell does not necessarily mean your business is in an optimal selling state. Proper planning in key areas can significantly improve your chances for a successful sale at a higher valuation. For example, take the time to organize your books, records and contracts – tighten expenses, and tie up loose ends. When going through this process, it is also important to address the larger issues:
Can your business demonstrate consistent revenue growth?
Are long-term client contracts in place?
Will the business be able to replicate results in your absence?
Many acquisitions fall short of the finish line because of unresolved issues. Attempt to identify and resolve potential deal breakers such as pending lawsuits or contract concerns before buyers get involved. Avoiding surprises in the due diligence phase can help to improve valuations and remove avoidable stress and an unnecessarily lengthy process.
What are my other options?
Depending on your unique circumstances, selling now may not be the best option. When determining whether or not to sell, also consider your alternatives:
- Value Enhancement – Take the time to resolve problems that may be preventing a sale and invest in improvements to increase your company’s value in the future.
- Partial Sale – Depending on your situation, selling a percentage of your company to a private equity firm can be an attractive option.
- Growth through Acquisition – After evaluation, you may find that the most strategic option is growth. Acquiring a local competitor can be a great method to boost revenues and line up a more profitable sale down the road.