4 Tips When Preparing to Sell Your Company
Ben T. Smith IV, co-founder of Merchantcircle.com & Spoke.com (btsiv.com), gives you 4 tips when you are getting ready to sell your company. These four points of advice will help during the vigorous selling process.
- Disclose all relevant information
- Clearly estimate variability
- Cultivate long-term relationships
- Prep your team for the change
First, you really got to decide you want to sell your company and having been to this process a number of times of helping founders who sell their companies. Where I see things often stall is when they think they want to sell their company, they get started and they realize maybe they don’t want to sell their company. So, you really got to make sure you want to sell your company. Once you’ve done that, deals fall apart for two reasons. One, no deal ages well, so time is always your enemy. And second, surprises.
We’ll, start with surprises. You need to have things cleaned whether it’s your documentation, your option agreements, your customer contracts. Every issue that you think is going to come up when it comes to that disclose early and disclose very clearly so that you can avoid that, a bump – a stall in the deal at the later point. If you have a lawsuit that’s sitting out there, tell them. If you have a crazy employee who has caused you problems in the past, tell them. You got a wacko customer who’s stalking your company, tell them. It really takes the surprises out from the beginning.
The second kind of surprise is business result surprises. So, there’s variability in your business. So, there are things that are going to go up and go down during the deal process. Lay it out up front and make sure you’re prepared to manage it. Obviously, you wanted to avoid those risks as much as possible and smooth things out. But if you can’t avoid it, then make sure you’re almost overselling that variability so that people don’t get surprised.
The other two things to consider really fit under this idea that we all know which is, no deal ages well. So, that means, you got to move to the deal process as fast as possible so you can maintain the momentum of the business and you can maintain the sense of urgency on the buyer.
Well, the first part of no deal aging well is you’re going to make sure you got buyers in the table. You have to develop those relationships over a long period of time since you can literally pickup the phone and get people to engage in the process with a very short period of notice. That means they got to know who you are, they’ve got to be meeting with you for years, they’ve got to know your metrics in order to get them in the process. So, a lot of preparing to sell your company is going to happen over a couple of years ahead of time and making sure you have the buyer market wrapped.
The second thing about no deal ages well is prepare a small portion of your team, possibly outside counsel if you’re using a banker. Prepare them to move. You don’t start a deal process slow. You don’t start a deal process thinking I’m going to sort of slow burn this. And then, I’ll pick it up at the end of the summer. You need to prepare from day 1 to move to a close and get the deal within six weeks. It’s not going to happen in six weeks. But you got to be prepared to make that happen.
So again, when you’re really thinking about preparing your company for sale, avoid surprises and accept that no deal ages well so you got to move fast.