The decision to sell your business is not something you take lightly. But when the time comes, you better prepare your business sales well. Brookz therefore list 5 do’s and 5 donnas for you: what should and what should not be done to realize a successful business sale?
Of 5 dos
Make an exit plan
Selling your business is not just a business thing, it is also an emotional thing. Therefore, it is good to make an exit plan. This plan initially examines your personal motives, with questions such as why you want to sell your business, how will you say goodbye, within what period will you step down and what will you achieve with the transfer. The second part is about your company with questions such as how do you work towards exit, how do you increase the value of your company and who is the ideal buyer. Bee Brookz, the largest acquisition platform in the Netherlands, we see that all successful business transfers have one thing in common: the entrepreneur worked systematically towards the sale of his business. Thorough preparation and planning provides calm, overview and structure.
Start preparing on time
If you decide to sell your business today, it will not happen tomorrow. And not next week either. Or next month. Selling a business is a lengthy process where you reap the most tax benefits when you start getting it ready for sale at least a year in advance. In addition, you can also add value to your business by lowering the risk profile and increasing free cash flow. The sooner you start, the more likely you are to sell your business on your terms because you are prepared for everything and in driver†s seat remains throughout the sales process.
Make yourself redundant
When it comes to SME acquisitions, this is often the biggest stumbling block: ‘the guy is the tent’. Logically, you would mean. You have built your business from scratch, you have pulled the business out of stagnation or let it grow significantly. Many entrepreneurs proudly announce that they are the company. They are crucial to the success of the business and it gives them a degree of importance. This is a big risk for a buyer, because what will be left of the business if you leave? Make yourself redundant, for example by delegating tasks or strengthening the management team. Then a buyer is much more likely to buy the business.
See your business through the eyes of a buyer
Of course you have the most beautiful company in Holland. But a buyer also looks critically at the risks. Look at your business as if you were the buyer; what would you turn off or what are the areas for improvement? In addition, selling entrepreneurs are happily pondering how well their business fared five years ago. The beautiful turnover and profit figures can definitely be reached again, they tell themselves. But a buyer does not rely on the past, but on the future and asks himself only one question: what can I gain from it in the future?
Orient yourself to the ultimate sales moment
The Dutch market for acquisitions of small and medium-sized enterprises is strongly sentiment-driven. The fact that the economic ratios are still favorable is a signal that this is a good time to sell. Brookz tracks what buyers are willing to pay every six months, based on the ratio between operating profit before interest, tax, depreciation and amortization (EBITDA) and the so-called company value (company value). From the latest Brookz Acquisition Barometer shows that Dutch companies sold for an average of 4.85 times the profit. Do you have an IT or healthcare company? Then this EBITDA multiple is even higher, sometimes up to 6.5 times the profit. It therefore pays to inform you now about a possible company sale.
The 5 don’ts
Do not include advisers in sales
Provided you can sell your business without advisors. But imagine how inconvenient that stock call is for a competing business because you do not want to shout from the rooftops that your business is in the store window. To maintain some anonymity, many selling entrepreneurs hire a buying advisor who addresses, assesses, and informs potential buyers. In addition, you have probably never sold a business before, so hiring experts is not a luxury. And remember: good advisors pay twice as much for themselves.
To see every buyer as the right buyer
Not all potential buyers are the right buyer. It depends on your desires, conditions, goals. Let’s say that if you want to start a new business, you will not have a non-compete clause of two and a half years. In that case, it is better to look for a successor who wants to close the deal without a non-compete clause. Or if you have a disagreement about the future of the company (naming, staff, etc.), then it is not the right buyer. In addition, the economic picture often plays a major role. You do not want to waste time with candidates who can not get funding. The first thing you want to know is: can the buyer afford it? If this is going to be a difficult story, it’s better to say goodbye to each other at an early stage.
Responds emotionally to Business Points
It sounds pretty strict, but you have to remember that at some point in the sales process it is all about business. During the knowledge of the buyer and the conversations, it is primarily about getting to know each other and about chemistry. But from the negotiations onwards, it is primarily about numbers and from that moment on, the business rises more and more. Therefore, first and foremost, make sure that your emotions do not get overwhelmed, because the buyer will criticize your business. It is often shooting with hail to take over your business on (like many of) its terms. Make sure your advisor takes the blow so that the business aspects continue to dominate.
Stick to one hundred percent cash
Of course, you want to sell your business in one fell swoop cash† But it is becoming less common to pay and say goodbye to acquisitions in the SME sector. Banks are less willing to finance a takeover than before the crisis, it is clear. This means that the buyer will more often encourage the seller to facilitate the trade. Roughly speaking, you have two options: You can choose a lower selling price that the buyer can fully finance or a higher selling price, whereby you participate in the financing to complete the transaction (liability loan, serve out† With these types of constructions, you need to make sure that you require some degree of control.
Overestimate your own best before date
Of course, you take into account economic prospects, market figures and business motives. But think of a somewhat ‘softer’ reason: Are you still the right man (or woman) for your business? For a ‘career’ as an entrepreneur is very difficult. Most entrepreneurs work at their own business 24 hours a day, 7 days a week; answer a few emails on the smartphone along the way, complete the offer for the potential customer in the evening or update the administration on Sunday afternoon. It is no wonder that entrepreneurs are sometimes exhausted and have little energy left to pull the cart anymore. In short, 2022 is a good time to ask yourself if you have exceeded your own best-before date. Because if that’s the case, now is the time to act!
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