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Before announcing the sale of the business, every owner must ask himself the important question of whether he is ready to take action. Once the decision is made, he must then move ahead and start preparing for the transaction. Here are the five key elements to plan before announcing the sale of your business.
Most SMEs are not well organized to allow potential buyers to value their business. The context of the sale should therefore be carefully analyzed at the beginning of the preparation phase. This will help enhance the company’s value, prepare sales pitches and better inform buyers. In that respect, the following points need to be assessed:
As a result of this analysis, sellers may decide to delay the sale of the business because of future events that would increase its value. If management, for example, believes that sales of a new product will "explode" in the years to come, it may be best to wait before proceeding with a transaction.
To increase the value of your business, you need to identify its strengths and weaknesses. You will consequently take advantage of these strengths while taking appropriate measures to correct the weaknesses. In the context of a planned sale, the challenge is to address weaknesses by implementing measures within a period that can sometimes be very short. Hereinafter are some examples:
Although some of the elements outlined below may evolve depending on the flow of discussions between sellers and buyers, it is still essential to ensure that these items have been discussed and analyzed with your advisors and that they are in agreement with the conclusions.
The type of sale
At the very beginning of your preparation phase, you must ask yourself the following question: Do you sell assets or shares? Below is a summary of the advantages and disadvantages of these two types of sales.
The selling price and payment terms
The valuation of the business is very useful in setting a reasonable range within which the selling price will be fixed. There are several approaches and methods to determine that price range. The best known is the profitability approach, which is based on the ability to generate revenues, the risks associated with these sources of revenue and the related costs. In addition, defining the payment terms at the time of the sale is also important. The following are some key questions you need to ask yourself:
The timetable for completing the sale
Setting out a timetable will allow you to move forward with confidence towards closing the transaction:
Specific ancillary agreements
The list can vary greatly depending on the situation, but the most common ancillary agreements to be negotiated later are:
Various preliminary information documents will be required before starting the marketing phase of selling your business. Brief descriptions of these documents are presented below.
Selling a business is a long and complex project that requires great preparation and multiple knowledge and expertise. Given the importance of the project and the need to protect its assets, the entrepreneur should not embark in this alone. Of course, being surrounded by professionals means extra expenses, but the benefits are too numerous and important not to at least think about this alternative.
The seller should therefore be well supported by a team of specialists for the following reasons:
Preparing for the sale of your SME is an important step in achieving an optimal transaction. Avoid hasty decisions and take the time to consider all the essentials that will help you better position your business in the marketplace and increase its value to potential buyers.
Note: The masculine form is used throughout this article solely in order to simplify the text.
Also read:
Are you ready to sell your SME? 5 questions to ask yourself before taking action
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