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The day has come. You’ve founded, built and decided to sell your company. It’s been your baby for a few years and you’re happy to let it go for new challenges, whatever your reasons. Already up for sale and marketed by business brokers, a few buyers have expressed interest.
Now this is where it get very interesting. I have sat in meetings selling my own company or project and I have sat in meetings potentially buying or investing in companies. I have also had the privilege of sitting around the table listening to buyers and sellers engaging.
From those experiences, there have some interesting things have happened from both sides. While it’s true that buyers in South Africa are usually less risk averse and almost demand proof that they will make some sort of return, there are ways to increase the price and quicken the sale.
Here’s three key negotiation points that I’ve learnt in the past few years.
Ask, ask ask
My dad once told me: If you don’t ask, you don’t get. It’s the second most important rule of life, in my opinion. And in those “sale of business” meetings, the entrepreneur or business owner asking the most questions was always in the best position to understand the wants and needs of the buyer and tailor the sale accordingly. It’s Pull-Selling 101.
Why are you interested in buying? What do you plan to do with the company? What do you plan to do with the staff? and questions such as “How do you envisage realizing a return on this purchase?” were asked by some. One company actually turned away buyers who planned to lay off some staff.
Each in turn got the information they needed – to make sure that except for price, the buyer gets what they want in the deal, leaving only price to be negotiated. Too often there are so many variables that the puzzle pieces just can’t click together.
Show the facts
Long ago I learnt that even though I aced Mathematics and almost failed Accounting, it’s the financials that need to be serviced perfectly. If you are inviting someone home, what do you think of first? That’s right – you wonder if your house is clean and rush home to make sure it’s tidy before allowing them in. But when you sell a business, these guests come knocking at any time.
The same applies for your company’s financials – get them in order and keep them that way. Every month you should have completed financial statements at your own internal meetings and board meetings.
Other metrics are important to keep updated too. I’ve seen many people show month-on-month sales funnels and figures for a year to prove how their business is growing. And while it’s true that “turnover is vanity, profit is sanity”, both need to grow in some way in order to build a bigger business.
I have already stated how important staff can be to owners. Imagine selling your business to a buyer who lays off your most loyal employee who by now is probably also your friend. Staff are people and need to be treated as such. In the best cases, the staff are told that the owner is selling the business way ahead of putting it out to market.
Think carefully about how your staff will react, but definitely do engage with them. The last thing you want is unhappy faces upsetting both yourself and the buyer (now owner).
All in all, by preparing well and finding out everything about the buyer’s intentions, you’ll have a super company ready to craftily sell into the specific prospective party.
Image by Rachel Patterson via Flickr.