Selling your business? Sometimes you only get to do this once. It’s important to make sure you do it right.
Lessons from selling my business
Last month I shared a post on LinkedIn about an up-coming meeting of the Value Builder Board I co-chair with Martin Allison. One of our board members, Matt Driver, was going to tell the board about his recent sale of Mint Support Ltd to Eduthing Ltd. Matt was keen to share the lessons he learnt so that the other members could use them whenever they sold their business.
It’s a journey
I’ve known Matt for a long time and watched his journey from being a sort of accidental entrepreneur to running a successful business. With the help of Julie, his wife, he has grown the business with a steady focus and commitment to his customers and people.
I wrote a case study about Matt back in 2020 that told his story before the sale. At that point the business was coming out of Covid and preparing to grow further. To quote Matt,
“We have a management team that runs the business day-to-day and I am getting more time for me and my family. I feel I am on my way to build a business that can thrive without me. “
Value Builder Board
Martin Allison and I co-host the Value Builder peer board – we work through the exercises and tools of The Value Builder System™ plus add our own experience and knowledge. The members are all business owners and aspire to have a business that is sellable and valuable. Matt has been a member for several years. He has applied the learning from the board meeting to improve his Value Builder Score – an strong indicator of the sellability of the business.
Matt’s main lessons
So, what about Matt lessons? In no particular order here are the main ones he shared with the board.
Get a professional team to help you with the sale: its probably best to use a 3rd party advisor to help you sell your business unless it is a micro business. If you expect an estate agent to sell your house, then your business needs the same approach. Whether you use a business broker or accountant or solicitor will depend on your situation. Bigger, more complex businesses will tend to need an accountant / solicitor team.
Matt appointed a local accountant with experience in business sales and purchases to help him. Matt would never have been able to produce the Information Memorandum that was given to interested buyers. Plus, it’s really useful to have an experienced professional acting on your behalf in meetings.
Remember for many small business owners the sale of their business only happens once, whereas the professionals do it all the time.
Get all your data together well in advance: a buyer of a business will want to see a lot of information about the business they intend to buy. Often that data will be stored in a secure and confidential data room. Normal types of data include the historic financial results and analysis of the business plus future forecasts. Also details of the assets and liabilities of the business. There will also be details of the organisation structure of the business and the employees. There’s much more to list out but the key point is create your own data room and keep it updated. This advice makes good business sense even if you are not selling the business. Having your key information well-structured and accessible is good business practice.
Matt started getting his data together a year or so before his sale process started. It was funny to hear about his furtive approaches to collecting the data from some of his team. I did watch him once lay it on thick with a manager that the external accountant needed some information presented in a certain way as they were doing some new analysis!
Your buyer could well be known to you: The Value Builder system has an exercise called the Short List Builder. By posing about 7 questions about different reasons someone would want to buy the business the system helped Matt identify businesses who might want Mint. Matt’s ultimate buyer was on that list. That list was then prioritised by eliminating those prospective buyers who are too small or too big. Matt’s corporate finance advisor also used external databases to extend the list to business matt didn’t know.
Have a realistic value range you are happy to accept: When a business has been part of your life for years and almost feels like another child it can be easy to over-value it. Matt had been using the Value Builder Assessment for several years to guide him on the likely value of the business. As the business profits grew and he made the business run more without him then his Value Builder score and the profit multiple increased.
Also, with the work done by the external accountant Matt was able to know what value he could expect and when he should say no to offers. And he did reject some offers.
The sale process will take longer than you think: this shouldn’t be a surprise. When there are two parties plus advisors involved there are bound to be delays. Matt’s advice was to prepare yourself for this marathon as it consumes your time, energy, and emotion reserves.
Prepare yourself and your business for a sale: following on from the ‘marathon’ mindset for the sale process there is the ‘training time’ before the sale process begins. That training can take several years, depending what state your business is in. It’s easy to understand that getting the business into a more sellable state takes some effort and time. Growing its profits, building a team around you, making it run without you, etc doesn’t happen overnight. That’s why the Value Builder System is the best guide to doing that ‘training’. It certainly worked for Matt.
There’s a second less obvious part of that ‘training’: Preparing yourself as the business owner for exiting from the business. As I suggested earlier your business can feel like another child you have brought into the world and love dearly. Selling it to a stranger and letting your team transfer their focus to the new owner will be emotional. There’s a lot that can be said about this subject but to summarise, the greatest focus on exiting your business is to avoid regrets/ Whether that is how you leave your old team or how much you receive for the business, it is not good for you to have regrets. Again the Value Builder System has tools and guidance on preparing for a life after the business.
As for Matt, he bought a motorhome. Julie and he have plans to travel and enjoy themselves without the stress of running a business. As Matt said to me recently, it was great feeling to walk into Mint’s offices and be able to walk out later without thinking about recruitment, people issues or who was locking up tonight.
Closing thoughts
Most small business owners only get one shot at this. It’s not something you get to practice so it’s imperative to build up your confidence in preparation for the sale. So, if you feel similar to how Matt did, be sure to book a call with me to see if The Value Builder is right for you. Contact me here.
If you’re focusing more on development, why not read a bit more about the importance of values in your business.