You've tied the knot: it's time to start selling your business. You've toiled on your business for years and selling is now a logical next step to cash in on your hard work. But, where should you actually start?
We regularly get this question from No Monkey Business. We have therefore listed the 10 necessary actions for you. This way you can successfully go through the sales process of your business.
1. Do an (independent) valuation and determine your (floor) price & conditions
To start with, it is advisable to have an (independent) valuation carried out. Just like selling your house, it is a good idea to have a 'valuer' take a look at it. This way you get a feeling for the sales value and you can also determine the bottom price for yourself. If the appraisal is still not high enough, think about good preparation for your dream exit. In that case, wait a little longer before putting the proverbial "for sale" sign in the garden.
Now you can leave determining your business valuation to a Registered Valuator. This is a financial expert who specializes in determining the value of a company. Often this is quite pricey AND ask three Register Valuators what the value of your business is and you can sometimes get very different responses. Indeed, the choice of a specific valuation method can have a lot of influence on the intended value. Therefore, check in advance how you want the valuation to be performed and don't get too rich.
You can first make a rough estimate yourself. To do this, it makes sense to look at industry averages. In the Netherlands, you can use the Brookz Takeover Barometer for this. Internationally, consulting the Corum Group's annual Tech M&A report helps. These agencies give you market averages, expressed in the form of a multiplier, that you can use to determine de ondernemingswaarde. However, this is a rough estimate because this number only works in the formula "Enterprise value = EBITDA * multiplier" or "Enterprise value = Sales revenue * multiplier. Things like investments made, the amount of recurring revenue or the ownership of patents are all not included in this. As a result, it still makes sense to use a Register Valuator after you have determined the value of your business on a beer stein yourself.
Next, it's a good idea to set a floor price for yourself. Under what conditions do you want to sell a business. Do you plan to play a role for a few more years (possibly salaried) or do you want to get out immediately? And what do you think of the idea of an earn-out period; do you see opportunities or threats here. These are questions that are important to have answered in advance so that you don't end up with a proverbial mouthful during negotiations.
Create an IM & teaser
Now that you have an idea of the value of your business, it's time to start working on the "sales brochure. This brochure is called an information or investment memorandum in the world of Mergers & Acquisitions. This IM is designed to interest potential buyers in your business. A good memorandum has the following components:
a) Mission and vision
b) Market analysis
c) Your solution
d) Competitive position & track-record
e) Opportunity
f) Earnings model
g) Valuation factor and offer
h) Financial information
i) General company information
After finalizing your IM, it's time to translate the IM into a teaser. This is nothing but a summary of the IM up to a maximum of two pages. After all, you're going to need this teaser in step 6 when approaching potential buyers. You don't want to immediately throw all your company-sensitive information into the world. That is why a teaser (often anonymized) can offer a solution.
Curious about the other 8 actions? You'll find them in this e-book!
