Now you’re sure about selling your business you presumably just want to get on with it, to make it happen.
This knowledge piece is about planning and scheduling the necessary tasks. At the end it suggests alternative planning methods to use.
Remember it’s also about managing your time to fit around the demands of running the business until it’s successfully sold. ExitAdviser, as an online resource, gives you all the information you need in one place, at your finger tips, on the move if you wish.
ExitAdviser has simplified the overall process for selling your business down to a four stage project as shown in the headings:
Each stage contains a number of key activities. Some will be strictly sequential, in other words something must be completed before something else can happen, whilst others may take place in parallel.
Let’s assume that the whole process will take from six months to a year to complete. Before structuring an ExitAdviser Action Plan let’s look at each stage in turn:
1. Check the status
It's assumed here that you've already completed Stage One, but, if you haven't, don't worry. Whilst we're not going to repeat the material from Stage One in detail here, feel free to back-track to this section at any time, adding any outstanding activities to your action plan.
2. Prepare for sale
The emphasis here is on presenting the business in the best possible light to maximize the price. The proposition to a potential buyer is very different to that of a typical customer for your product or service.
You’ll need to allocate time to prepare. We’re not talking here about major surgery on your business that takes several years to bear fruit. It’s about targeting and prioritizing activities in the immediate term that enhances the impression your business gives to a prospective buyer. The specific focus needs to be on what’s important to them.
Buyers are more likely to be attracted by a concise proposition that allows your business to stand out from the crowd, whilst at the same time performing profitably. The importance of well-presented information therefore becomes self-evident. It’s a priority task.
A good tip as a starting point is to produce a Powerpoint presentation that can eventually be shown to prospective buyers. Limit it to 10-15 slides, using bullet points and few words. Then return to it regularly and refine it as you go through the sale preparation process. Practice the presentation in front of others you can trust and make improvements resulting from the feedback.
The further down the road you get with a potential buyer the more detailed information they’ll require, culminating in a forensic-like Due Diligence process to check out the facts you have previously presented. Before revealing commercially sensitive information it's best to require the buyer to sign a confidentiality agreement.
The key points that will impress a buyer are outlined in another knowledge piece. To summarize some of the main points:
- if you operate in an attractive, growing market you'll want to emphasize this point in your promotional material using a few pertinent facts as evidence
- conversely, if the market is less attractive, demonstrate a sound plan to counter the problems
- the importance of a strong customer value proposition ...
- ... that is delivered through a uniquely configured set of activities in your value chain ...
- ... that demonstrates clear trade-off decisions and logical linkages between activities ...
- ... which are performed in an effective, efficient way ...
- ... resulting in an attractive profit performance as reflected in your business finances
This may sound a little technical. And you may not be doing everything strictly according to the book. But you must be doing many things right otherwise you'd not still be in business!
It’s your positive story, told well.
Study your customer list to check for:
- common customer profile elements, and any exceptions that stand out
- what they buy from you, in what quantities, and at what regularity
- how they use your product or service
- what specific benefit(s) your product provides to satisfy their needs and remove their "pain"
- how this compares with the competition
Also important is how you capitalize on relative price advantage against the competition. Is it a premium price to reflect the higher value you add, or a lower price enabled through stripping out superfluous aspects (thereby reducing your costs) from the offer?
Your value creating activities are easily identified by tracking your processes from start to finish:
- examine the activities and their sequence
- whether activities take place internally, or are successfully outsourced
- map out how they specifically enable delivery of your value proposition
- how it’s different and better than the competition
There are 2 main action points arising from this analysis:
- What are the highlights of your story, the key points of competitive advantage for the business?
- What are the 3-6 main changes you could realistically make in the next three to six months, without damaging the business, to significantly improve short term financial performance, or market position, or both?
Changes to strengthen the business could be in any area, for example:
- customer service
- marketing and sales
Effort is best focussed on activities that maximize short term payback and, ideally, impact favorably on current year-to-date financial performance.
It also makes sense to incorporate realistic medium and long term measures in updated business and sales/marketing plans. The buyer will not wish to see an immediate dip in performance after the sale, so well presented ideas on the future will instill confidence.
They'll be extremely sensitive to business continuity considerations that maintain and improve their new asset. They may require you to stay with the business for an agreed period of time, as part of the final deal.
You'll need to provide detailed financial statements going back at least 3 years, assuming your business has been trading for this long.
Performance trends for key measures will attract attention as shown in absolute and relative numbers, and important financial ratios. Clearly presented financial information will help reinforce the impression of a well run business. Typical statements included are: profit and loss; cash flow; balance sheet; and seller’s discretionary earnings. Professionally audited accounts naturally carry more weight.
This leads neatly on to the subject of business valuation.
DCF is a scientific approach that stands up to scrutiny, whilst also enabling consideration of different scenarios, before settling on a realistic asking price. Using the ExitAdviser tool will also put you in a much stronger position to defend your ground during the inevitable Due Diligence and follow-on negotiations. There is much more about this subject in the Business Valuation knowledge piece.
If you have existing advisers, accountant and attorney in particular, you may wish to alert them early in the process as to your intentions. Clearly assigning responsibility for tasks is also important.
3. Going to market
Stage Two is mainly about making short term changes to the business in preparation for sale, as well as doing the all important valuation exercise.
This section aims to translate this into the bait that'll attract the right potential buyers. This can incorporate any meaningful benefits realized from the short term measures taken.
Your action plan for sale will include:
- identifying an ideal buyer profile that'll help to better target your promotional activity
- complementary businesses, in the same or similar sectors, that could benefit from your capabilities and competitive advantage
- where a buyer is most likely to be based geographically
- whether there are competitors that might show a serious interest
- how you might identify other potential buyers with a knowledge and experience of your market place
- where you might find those with the resources and skills to successfully take on your business
The pay-off from this thinking time and targeted promotion will be better quality enquiries, with fewer from time-wasters. For example, you could place targeted advertising in the classified ads section of local newspapers, or in relevant trade magazines. Set aside part of your promotional budget to make this happen.
It’s true that buyers tend first to search online using the main business sale websites. That’s why this promotional activity needs to be part of your budget too. Although online search volumes can be very high, in reality only around 10% of searchers turn out to be serious buyers. Depending on the business, buyers also tend to purchase within a local radius thereby further limiting potential hot prospects.
The crucial Sales Memorandum document is covered in detail in another knowledge piece, providing guidance also on the best way of presenting information in your advertising. The Sales Memorandum is provided only in response to serious, vetted enquiries and is released to prospective buyers, advisedly, on the strict condition that they first sign a confidentiality agreement.
This just reinforces the importance of screening your incoming traffic. Requesting relevant information from potential prospects when responding to your advertisements is a great way of filtering out those that are not serious. Before they take up any of your valuable time.
4. Closing the deal
It's easier to schedule activities in Stages One, Two and Three.
Closing the deal is slightly less easy to plan in advance, although you'll have certain aspirations regarding timing.
You’ll have entered dialogue and correspondence with respondents of the right profile, by telephone and email, and may have had initial meetings with a few prospects.
A Letter of Intent to purchase is the first sign of an positive impending sale result, leading naturally to Due Diligence, then maybe further negotiations, to signature of the necessary legal documentation, and finally a handover period enabling "business as usual".
You can take some control over this third stage by proposing a timetable of events to the buyer once the Letter of Intent has been signed.
Moving on now to methods you could use to plan your business sale, here are 3 possibilities:
- use your own method, whatever has worked successfully for you on previous projects
- use a diary method, electronic or paper, that lists tasks, dates for completion, and assigns responsibilities
- a more structured project management approach particularly suited to team situations, using the simple Agile method
The first point is self-explanatory. The second may involve sharing electronic diaries or secure online workspaces with others supporting you.
Point three suggests the commonly used Agile Project Management method that has flexibility as a key strength. This enables rapid adaptation to new information and circumstances as they arise during the process.
Another key strength of Agile is its focus on the user perspective, in this case a potential buyer. In Agile terms these are defined as "User Stories”.
For example, one buyer perspective on a User Story might be, "I want to earn a minimum $50,000 in personal income per year from the business”. User Stories can then be ranked using a simple point scoring system. Research into target prospective buyers will offer important clues about their needs, and guide the relative rankings.
A "Product Backlog” wish list is then drawn up from the User Stories. Prioritizing here is according to the MoSCoW principle or:
- "Must have”
- "Should have”
- "Could have”
- "Would like
These Product Backlog activities are the specific requirements arising from interrogating the User Stories. Tasks are then selected from the Product Backlog for completion within a series of timed activity "Sprints”. Typically in "Sprint Planning” priority will be given to "Must have’s" and "Should have’s” drawn from the Product Backlog. "Would like's” are usually placed outside the scope of the project under immediate consideration, in reality becoming "Wont's" for now.
In this way, activities remain focussed on key user needs and getting the job done. Sprints and their Sprint Plans, numbered sequentially, are overseen by a Project Manager (or "Scrum Master"), in all probability you.
Each Sprint is reviewed at its end in a formal diarized session with all team members present, if not physically, then as part of a teleconference. A task's status is marked complete by team agreement. Incomplete tasks may be adapted in response to new information, or rolled over to the next Sprint, or cancelled if deemed no longer relevant.
Smooth running of the Sprint process is helped by setting realistic time scales and clear responsibility for each task during Sprint Planning. It's best to avoid Sprint time lengths that are too short to deliver chosen tasks, and ones that are too long causing loss of focus. Subject to agreement, the Agile method could be adopted with the buyer for the Closing the Sale stage. Typically effective Sprints last 2-4 weeks. Mini reviews can take place regularly during a Sprint to keep things on track, sometimes daily, depending on the project.
Again, there are a number of Agile mobile applications on the market enabling you to share planning activities, and facilitate progress reviews with others.
Agile allows for managing parallel activities within and between the ExitAdviser stages. You determine your own User Stories, Product Backlog and the number, content and duration of the Sprints.
Returning to where we started, let’s assume as a guideline that, taken together, Stages One, Two and Three will last up to six months, with Stage Four taking up to three more months before final closure.
That’s nine months in total. It may be less, it may be more.
And, at earlier stages in the process, you may decide it's sensible to postpone the business sale for a period of time. Perhaps enabling you to take longer term measures that'll yield a better price for the business as compared to the time and cost of undertaking them.
Finally, as mentioned at the start, its valuable to revisit, update and practice your Powerpoint slides, whether you choose to actually deliver the presentation to a buyer, or not.