STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
The process for how to sell a business with this much value begins with learning how to tell the story of your business. There are five components to this story.
To help you navigate the business sale process, you will also need a financial advisor. Pillar Wealth Management has extensive experience in helping high net worth business owners sell their businesses. Schedule a free call to see if we are a good fit.
Also, get started with this powerful free guide – Exiting Strategies – The CEO’s Seven Critical Steps to Cashing Out Of A Business, Managing And Preserving Wealth
When you try to sell a business, your buyer will need more than just financials to understand what they’re getting and to properly appraise the value of their purchase. To prepare for negotiations with potential buyers in a merger or acquisition, you must first get your business house in order.
Table of Contents
This article will walk you through all the artifacts you’ll need to help your buyers understand your business. You can think of these as the building blocks of the story of your business.
Two Other Critical Steps in Preparing to Sell Your Business
Before working through the five items for how to sell a business, make sure and utilize these other two resources first. What you’re about to read is actually step 3 in the business exit process. Below you will find what you need to complete steps 1 and 2.
Step 1: Use this 17-point checklist to develop your business exit strategy
Step 2: The 5 critical members of your business sale team, and 8 tasks they will help you complete
With your exit strategy worked out and your team of experts in place, you’re now ready to start compiling what you’ll need to present your 8, 9, or 10-figure business to potential buyers.
Each of the items you’re about to see represents one component of essential information about your business. This information will enable you to conduct substantive and data-informed discussions during the merger and acquisition negotiation process.
How to Sell a Business: The 5 Items Buyers of Your 8, 9, or 10-Figure Business Will Want to See
Your Business Profile
To sell a business, any potential buyer needs to understand what makes your business special. They need to know how you built it up to this point, how you’ve organized it, and the goals you’ve been working toward achieving. The profile is where your business story begins.
At a minimum, your business profile needs to touch on at least five areas:
What market sectors have you pursued, and why? Where are you devoting your resources? What new products or services are you working on, and why? What is your business about? What are your goals?
Communicate the mission of your business, and where the bulk of your efforts get invested.
How are you working toward achieving the goals, products, and services your business is focusing on? What has worked well, and what hasn’t?
How is your business different from all the others? What needs are you meeting for customers that no other business is meeting? Or, how is the way you’re meeting those needs unique and better? Differentiation speaks directly to value.To figure out how to sell a business for maximum value, amplify your differentiators.
Describe how your business began. How did you build it up to become an 8, 9, or 10 figure business? Walk through your growing pains, challenges, triumphs, and worries you’ve overcome. Show them your battle scars.
- Org chart
Let them see the breakdown of personnel and responsibilities. This is what you’ve built, and it’s working. Show them how you’ve structured your team.
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- Your Customer Profile
To sell your business for maximum value, you want to assure your buyer of the health of your customer base. The more you know about your customers, the greater confidence your buyer will feel that they can come in and build on what you’ve started.
You want at least four elements to build your customer profile:
This can go much further than age and ethnicity.
Depending on the size and nature of your business, the number of demographic categories you can amass can be immense. If you’ve been tracking things well, you may have categories as specific as ‘Hispanic homeowners in San Jose with college degrees and children,’ or ‘San Francisco Bay Area retirees who own pets’, or ‘Fremont millionaires who vote Democrat.’
The more specific and the greater number of categories, the more potential your buyer will see for continued growth and marketing possibilities.
- Buying Habits
Doesthe business you want to sell have mostly repeat customers and clients, or do you also attract a steady flow of new customers? Do they buy in bundles and in bulk, or mostly single purchases? Do they prefer specials and coupon deals? Do holidays play a role?
Do your customers come to you spontaneously because of brand reputation, or are they heavily responsive to your marketing? Do they shop mostly online, in store, over the phone, some other way?
Help your buyer understand how your customers have historically interacted with your 8, 9, or 10-figure business.
- Target Audience
Your products and services are more than likely geared toward a specific audience. Describe that group for the buyer of your business. What needs do they have? Why do these people or businesses have these needs? What problem are you solving for them?
This should correlate to your differentiators from your customer profile. The things that make your business different should be the very things your target audience needs or responds to the most.
- List Size and Quality
List out how many people or businesses you have on your email list, your direct mail list, and as social media followers. Include a description of the quality of these lists.
For instance, if you have 10,000 mailing addresses but haven’t mailed them any direct mail in four years, you don’t really know how healthy or responsive that list will be. If you’ve been sending a steady stream of emails for several years, you should have strong data about open rates, clicks, and sales through email.
Your buyer will want to know the value of these critical marketing assets.
Your Business Processes and Assets
To sell a business that thrills the buyer, specify the products and services your 8, 9, or 10-figure business has working for it. This helps your buyer understand the number and value of assets they will be acquiring if they purchase your business. Give figures for volume, revenue, and profits for your various products and services.
In addition, list out the personnel assets that will come with your business. You may be selling the business, but you have key employees who will probably remain as part of a merger or acquisition.
These employees may be considered indispensable for the business to continue thriving, and the buyer should be made aware of who these valuable people are so they don’t just discard them.
The ‘people-transition’ process that must transpire during a merger and acquisition must be handled deftly and carefully to maintain the value and momentum of the business. In other words, you don’t want to alienate and anger all your key staff so they call it quits two weeks after the sale goes through. But you also don’t want the new owner to just fire them all.
Both sides need to recognize the potential value of what’s being given to them as you work through the process for how to sell a business.Talk about your potential business sale with a 30-year wealth management professional.
Your Marketing Data and Strategies
Here’s where you can give your buyer firm confidence that they can charge out of the gate right after taking the reins of your 8, 9, or 10-figure business.
When you can show them the marketing you’ve used that has worked, you will be able to seal the deal. Have data metrics showing how well your marketing has worked to do things like: Attract and retain new customers, raise your average transaction size, grow your revenue with regard to each product and service.
One of the best secrets for how to sell a business is to make your marketing systematized and replicable. Your buyer won’t have to start from square one. This is one item your business sale team can help you with to better position your business with the highest possible value.
Some aspects of your marketing you’ll want to communicate about include:
- How you acquire and attract customers
Show your buyer your marketing funnels and the assets that comprise them. Show them conversion numbers at each step, if you have data at that level of detail.
Discuss your social media strategies, email, direct mail, TV, online, radio, print, and any other medium your business is using. Show them your best-performing ads and marketing campaigns in your various media.
What you don’t want is a buyer who realizes almost all your business comes from one source. If that source were to dry up for some reason, what would happen to your revenue? A key principle for how to sell a business for maximum value is to position it as low risk, high reward. That means customers coming in from a variety of sources.
- How automated is your customer acquisition and retention?
Again, the more automated your marketing systems, the more your buyer will be able to visualize themselves continuing to earn the profits and revenues you’ll be showing them during negotiations.
It’s a lot easier to sell a business when running the business doesn’t all depend on you.
In contrast, if your business is heavily dependent on referrals and personal relationships with you that are hard to quantify and replicate, a buyer may worry that many of your revenue streams will dry up when you leave. If it’s more about you than systems of marketing, you may have a harder time selling the business.
In other words, an owner-centered business is worth less than a process-centered business. This is true whether it’s a mom-and-pop store or an 8, 9, or 10-figure business like yours.
- Show your plan for retention of customers and staff
Marketing also depends on your staff not all jumping ship when you leave. Your employees know your business perhaps even better than you do. You need to have a plan for retaining your customer base and acquisition system, as well as your most valuable employees.
Discuss how you intend to communicate the ownership transition, when the business sale process gets to that point.
Your Business Finances
As the final component of the process for how to sell a business, show them the money.
Your financial picture should include income, costs, growth, and projections, and your data should go back at least five years. At a minimum, you’ll want to include:
- Business growth for the last five years
- Income (revenue and profit) for the last five years
- Overhead expenses for the last five years
- A responsible projection of future income
Don’t fudge anything. Don’t start the data at the place that makes your business look like it’s growing more than it really is. Just lay it out there and give an honest picture. If you have future expenses (such as business loans coming due) that you know will hit in the future, spell those out.
Be Ready for Questions
With a customer profile, a business profile, business processes and assets, marketing strategies, and finances, you will be presenting your potential buyer with the five major components of what they need to know to make an informed decision on whether to buy your business.
But they will no doubt have questions, and this is in part where your business sale team will shine. How to sell a business depends greatly on having the right team. Your team should know the story of your business as well as you before any meetings take place with a buyer. They should be able to answer questions that touch on their area of expertise.See how to choose the best financial advisor to add to your business sale team.
One of the most common questions asked by buyers is, why do you want to sell your business now? Could be retirement, feeling overworked, ready to move on, personal issues, many other things. But have an honest answer ready.
With you and your team prepared and ready with all this information, you will be well-positioned for a successful negotiation for the sale of your 8, 9, or 10-figure business.