One of the things I enjoy about working with furniture and home furnishings business owners is how personal it is. But what happens when it’s time to consider selling the business? All of a sudden, one’s personal pride becomes one of the most important business transactions in your life. From my recent work advising business owners on sales, I wanted to pass along some thoughts on just a few key issues I see arise again and again.
The most important question with the sale of a business is: why? That’s the first question I always ask, and the answer dictates the best approach to the entire transaction. There could be many reasons the owner of a business would look to sell it. To name a few:
The business owner is done with it. Maybe it’s time to retire, or for whatever reason, it’s time to do something else.
The business would sell at a particularly high value because of market conditions, a trend in the industry, the overall economic climate, or some other reason.
The business owner sees a greater opportunity in being part of a larger company or different entity, and plans to stay involved once the sale takes place.
Whichever of these applies (and it may be more than one) will dictate the overall approach to negotiating a deal. Whatever the case, a seller is likely to achieve the best outcome with well thought-out reasons for pursuing the sale.
Protecting your secrets: A prospective buyer of your business will want to know as much as possible about what he or she is buying. But you’ve worked hard to protect confidential information. It’s crucial to make sure this protection stays in place, not only during this research before the sale, but also in case the deal falls through. On the legal front, a nondisclosure or confidentiality agreement can provide protection. But also, ask yourself: do you even want to start the process with this particular buyer? Does it make sense given your strategic goals and priorities?
The price is right? Clients and friends regularly mention to me that their business would be worth a certain amount. But in these transactions, determining the value of a business can be complex, and it is always a point of negotiation. Your business might be worth more to one type of buyer than to another. You might see an opportunity, and higher value, in your business than a prospective buyer does. And this is just the beginning.
The most important thing from your perspective is to approach the transaction armed with knowledge and intelligence about why your business might command a certain value and what a buyer is looking for. And, like with any deal, you never want to rush into something, selling your business at too low a price, because you did not take the time to understand these key factors and your overall strategy.
These are just some of the many important issues consider. There are many, many others—all of the business and legal work for one of these transactions can take weeks to months. I’d be interested in hearing from any of you who cultivated your own business and then sold it, or have thought about it, and what has been most important to you.