5 Questions to Ask Before You Sell a Business in Chicago
Selling a business is a massive undertaking. You know this on some level, but it’s easy for owners to underestimate the time and effort involved.
Selling a business is a massive undertaking. You know this on some level, but it’s easy for owners to underestimate the time and effort involved. This is doubly true for entrepreneurs at the helm of sales-based businesses, who assume as natural salespeople they’ll also be well-prepared to sell a business. Selling a company is worlds apart from selling goods or services—but one thing it shares in common is that it requires industry knowledge and specialized skill. This is why it’s so critical to hire an investment banking or M&A advisory firm to see the deal through to completion. But preparation begins even before you hire expert insight. Here are five questions you must ask yourself before you sell a business in Chicago.
Why am I selling?
Rest assured, the buyer is going to ask why you are selling your company. It’s wise to have a compelling answer. Asking yourself your reasons for selling ahead of time can help clarify your purpose and guide the process of setting goals for the sale.
What are my plans for the future?
A lot of owners can’t easily envision a life not spent running their company. This may inspire dedication during the daily grind, but when it’s time for M&A, it can undermine the process. If you don’t have a clear plan for the future, then your motivation to see the sale through to completion will be low. Knowing your plans for the future can also help you assess whether the buyer’s offer fits in with those plans.
How will a prospective buyer perceive my business?
The simple exercise of putting yourself in the buyer’s shoes is one of the most important exercises that you can do in the entire process. A business is a lot like a child. It can be hard to see your company’s faults. It may also have strengths you never noticed because you never focused on them. Now is the time to consider your business from the perspective of an outsider. What value does it offer? What are its liabilities? Why might a buyer consider investing?
Is it the right time?
The market can greatly influence the process of selling a business, no matter how profitable it is. Consider how credit availability might affect pricing, or how market instability may influence the long-term future of your company. Work with an M&A advisory team to assess how wider market conditions, your business’s finances, and conditions in your niche may affect the sale. Sometimes battening down the hatches and waiting for things to improve is the wisest choice.
How much is my business worth—and how much do I need it to be worth?
Beware of the country club fishing tales, and advice from folks outside of the M&A profession. Valuation is often the biggest source of controversy between buyers and sellers—and many owners have unreasonable valuation expectations. Get a valuation early, and ask the expert the specific formula they used to assess your business’s value. A valuation may guide decisions by identifying shortcomings and strengths. It can also help set reasonable expectations for the sale process and support you to build a profile of your ideal buyer. Objectivity is key early in the process.
Why am I selling - Do I REALLY want to SELL?
Do I really want to sell? The answer to this question MUST be a resounding “YES.” If it’s not, it will ALWAYS move to “NO” at some point. That No will usually come with great pain and expense to you as the owner, often to the company, and those around you. Saying “Everything is for sale at the right price…” is a ticket to misery and expense later. You will never get to the “right price” without having a compelling reason to sell. Good buyers will sniff this out and it will make closing every more difficult.