As a consultant in financial due diligence I see it regularly: entrepreneurs who want to sell a business, but are insufficiently prepared for what is really involved. The focus is often on finding a buyer and negotiating the price.
But a successful sale is about more than that. A crucial step is the due diligence investigation, in which the buyer thoroughly examines your company: financially, legally and operationally. This investigation helps uncover risks and determines the ultimate value of your business.
Crucial information
Good preparation is essential here. Because as the saying goes: 'a fool can ask more questions than ten wise men can answer'. In practice, this means that as an entrepreneur, you may be inundated with questions and requests for documentation of various workflows.
What I often see here in SMEs: the entrepreneur knows the business inside out, but a lot of crucial information has not been formalized. For a buyer, this raises questions such as: what will be left of the business without the DGA? That is why it is important to have your administration, including customer and supplier agreements, in good order. This gives confidence and shows that the business can continue to grow even without you.
Story behind the numbers
Good preparation not only helps to answer questions, but also to get ahead of them. By understanding sensitive issues in advance, such as deferred revenue positions, outstanding liabilities or dependencies on specific customers, you can make these negotiable before they come up as surprises. This prevents the buyer from drawing their own conclusions, and gives you control over the story behind the numbers.
In addition, a clear overview of revenue, costs and margins per product or service helps to substantiate the value of your business. In particular, insufficient substantiation of future opportunities or agreements can lead to uncertainty and a lower purchase price.
Stay in control
Preparing your company for sale requires timely action. Hiring an acquisition advisor can be of great benefit to you. Although this involves costs, practice shows that it almost always pays off. An adviser helps set realistic expectations and make the process efficient. With guidance, due diligence can be completed within weeks. Without an adviser, it can take months or even fail.
In short: a successful sale is not only about the buyer and the price, but especially about good preparation. By putting your administration in order on time, establishing processes and assessing risks, you avoid unnecessary questions, stay in control and increase the chances of a smooth transfer and an optimal valuation.
So start on time, so you can sell your business with confidence and not think afterwards: if only I had done this earlier.
