It’s been quite a journey! You’ve created, built, and led a successful company that has supported you, your family, and your employees for years. As with most businesses, however, there comes a day when the entrepreneur steps aside and makes way for a new owner to take over.
There’s just one more step you need to take before you can hand over the keys and begin your next endeavor: negotiate the sale of your business. Handling the negotiation properly can lead to a higher selling price and a more beneficial result – for all parties involved.
Before you enter into a negotiation, there are a few important ways you can prepare to achieve an optimal outcome.
Adopt the Right Mindset
Whether you are negotiating directly with a buyer or you are doing so through a broker, financial advisor, or attorney, you are the one who is responsible for setting the tone for the negotiation.
The primary objective of an effective negotiation is for both parties to feel as though they’ve gotten a fair deal. Do not consider the buyer to be an adversary, but rather a partner who has the same goal as you: to complete a successful sale of the business.
Buyers are more likely to take a combative approach if they feel that your goal is not to pursue an equitable agreement. If you lose the trust of the buyer, the negotiation can turn from a collaborative effort to a contentious one. Does striving for fairness mean that you need to accept less money for your business? No. It merely means that your goal is to find a solution that benefits both parties. When the buyer sees that you also have her interests in mind, then a fair deal is more likely.
Be Prepared: An Accurate Valuation Is Essential
Walking into a negotiation without having the facts is a surefire recipe for disaster. It is highly likely that a prospective buyer will be working with a professional to identify the market value of your business, and you should too.
Determining your company’s worth is much more complicated than simply multiplying its EBITDA by a pre-set number. While profitability is a key factor, there are many other considerations that need to be analyzed before you can arrive at an accurate valuation. Ignoring critical components, such as the strength of your customer base, your company’s goodwill, your workforce, your competition, and your market will result in a skewed perception of your company’s value.
One of the most important steps you can make when selling your business is to obtain a professional valuation. Without it, you are at the mercy of the buyer’s valuation, which may or may not reflect a fair selling price. Since 2010, Peek Advisory Group has worked with companies of all sizes to provide comprehensive, accurate valuations. Before you take a seat at the negotiating table, make sure you have the facts. Learn more about our valuation services here.
Keep Emotions in Check
Many entrepreneurs think of their companies as their babies; they conceived and lovingly nurtured their businesses over many years as it grew. As a business owner, you may feel the same way. But when you allow your emotions to intrude in the negotiating process, you are clouding your judgment and you may jeopardize the sale itself. Working with a financial advisor can help you focus on what’s important: receiving the full and fair value of your business.
While your company’s valuation is the cornerstone of your negotiating strategy, there is much that a business owner can do to sweeten the deal. Offering to facilitate your company’s transition to the new owner can be viewed a significant asset. Your continued presence in the business immediately following the sale could be pivotal in achieving a smooth transition. Your company may be seen as more valuable if you offered to make personal introductions to your top clients, vendors, partners, and other stakeholders, and serve as a resource while the new owner is finding her footing.
With an accurate valuation, proper preparation, support from financial professionals, and the proper mindset, you can be sure to reap the full value of the business you’ve worked so hard to build.