What Is The Best Checklist When Thinking About Selling My Business?
If you’ve been running a service company or brand for some time and have crossed several million or more in revenue, you may be wondering what it takes to sell your business. If you’re in this position, first of all congratulations!
Second, here are the first set of questions I would be thinking about if I were in your shoes — which I have been when I led a company through a sale process in the past.
If you are in this position, here are some key questions to ask yourself:
Should I sell my business?
When is the best time to sell my business?
How is a business valuation determined?
What is the M&A process?
Do I need an investment banker to sell my business?
How long does it take to sell a business?
What is an earn-out in a business sale?
How should I handle the first offer for my business?
Should I leverage an offer with others when selling my business?
How do I manage stress during the business selling process?
Selling your business is one of the most difficult things you will ever do as a business owner. Not only do you need to execute this process flawlessly, you need to keep running your business during the process, and manage employee expectations about a sale. Mistakes can be expensive.
A retained Exit Advisor is your trusted confidant on the road to selling your business. Similar to a "fixed fee" investment advisor, an exit advisor doesn't make more money if you sell, and makes just as much if you don't sell -- if that's the right thing for you.
The important thing is an exit advisor is on your side of the table. Having been through this entire process -- both successfully and unsuccessfully -- I have seen all the challenges and worries that come with this.
If I can help you during a process you are thinking about in 2023, please feel free to reach out to me. I'm happy to listen.
FAQs When Hiring An Exit Advisor:
What is an Exit Advisor?
An Exit Advisor is a trusted, retained advocate that you can lean on for brainstorming, decision making, and occasionally therapy (!) during the difficult process of selling your company.
How can an Exit Advisor help me sell my business?
There are a few ways that an Exit Advisor can help you during the sales process:
Help you decide if selling at all is a good idea; perhaps you should raise money, or make other business changes, instead of selling.
Help you decide if an investment banker is right for you.
Help you decide which investment banker to choose.
Help you decide the range of likely valuation outcomes.
Help you create materials needed to drive the sales process.
Help the investment banker generate a list of relevant, potential acquirers.
How much does an Exit Advisor cost?
While there is not going to be a universally accepted standard to this kind of relationship, an Exit Advisor is most closely similar to a retained advisory relationship, with a fixed timeframe. The duration should be approximately 6 months.
There is a fixed monthly retainer associated with these services for a 6 month period prior to and during a sales process.
How do I choose the right Exit Advisor for my business?
When choosing an Exit Advisor, there are a few questions I would ask:
Does the firm have relevant industry experience in my field?
Has the firm helped similar companies in the past?
Can the firm help me materially improve the outcome of the transaction?
How extensive is the network of the advisor, and can they help me get introductions to the identified acquirers if necessary?
What are the benefits of hiring an Exit Advisor when selling my business?
The benefits of hiring an Exit Advisor, in general are:
Help you identify risky areas of your company that will be highlighted by potential acquirers.
Having a trusted third-party to review your plans with absolute independence.
Help explain parts of the sales process that your investment banker does not go over.
Help you generate a list of potential acquirers.
Having a sounding board during times where you disagree with the decision of your investment banker.
Help you connect with executives and partners who can assist with the sales process.
What is the difference between an Exit Advisor and an investment banker?
An investment banker, similar to a real estate broker, is hired to sell your asset for a percentage of the proceeds.
An Exit Advisor is hired to be on your side of the table prior to hiring the banker, during discussions with the investment banker, as well as with potential acquirers.
How long does it typically take to sell a business?
About six months is a good expectation for the time it takes to sell a business, starting at the time you hire your investment banker.
Can an Exit Advisor help me negotiate the sale of my business?
In many cases, yes. An Exit Advisor, along with your investment banker, can help you think through the likely outcomes and alternatives during your negotiation process to help you achieve the best outcome.
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