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How to get the best value when selling your business

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It may seem obvious, but the starting point is to put a firm value on your business. Get a clear sense of what you think it is worth and remember you will have a much better idea than any third-party of its intrinsic value, as you have been involved in its conception, nurturing and expansion.

Once you have a clear value in your mind it’s a logical move to approach a third-party to sense check it. Some business owners get too emotionally involved in their businesses and hold out for unrealistic valuations so it is important to get an objective analysis to confirm the valuation.

Before making any external approaches ensure that the business had been groomed for sale. It’s important that any pending transactions have been pinned down, any operational issues solved and that marketing initiatives, such as trumpeting the company’s firm intention to remain independent, do not contradict the forthcoming sales process.

Having done all this ground work then appoint a third-party to sell it. Don’t be tempted to do it yourself. Just as artists are not the best people to sell their own work, business owners are not the right people to sell their companies, their obvious eagerness to do so counts against them.

With your adviser in place, decide between you who your ideal buyer is likely to be so you can tailor how you present your business to ensure it has maximum appeal to the kind of buyer you are trying to attract.

Trade buyers are an obvious target and make sure you have assessed your competitors and peers to gauge areas in their operations where your business might find a home and where it could add value to help push up the sale price.

Remember some buyers may want to buy the company merely as an investment and will not want too much involvement in day to day matters, so it’s important that you retain some senior managers who can smoothly carry on the business once ownership has been transferred.

With your ideal buyer in mind, review the company’s financial and capital structure. Some buyers are happy to buy businesses burdened with debt and high-interest payments as they can write it off against tax liabilities or other businesses in their empire, others prefer their businesses as debt free as possible.

Timing is everything. You have to be in a position where you have time to negotiate and never appear to be in a hurry. This part of the sales process is very instinctive on both sides, the more patience you can display the better the odds for your profitable sale.

Finally be as flexible as you can in terms of the time you are happy for a buyer to complete the sale. In my experience, the more time you allow your buyer to access the full range of his potential resource the higher price you will probably get for our company.

Patrick Gruhn is one of the founders of The Elevator, a top private equity and philanthropy magazine, founder of FirstPEX, Europe’s first online platform for trading shares in private companies and author of “Power Play: How to plan, fund and grow your 21st century business”.

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