A guide to finding your “why,” articulating your business’s value, and executing your sale with confidence
This post was first published on my Medium blog—follow me there for the most up-to-date entries!
Selling your business may be the most significant decision you’ll make as an entrepreneur. It’s an opportunity to reap the rewards of your hard work and move forward with your next chapter. But first, there are three essential steps to take before selling your business that will ensure a smooth and successful transition.
1. Gain clarity on your “why” for selling
The first and most crucial step to take before selling your business is gaining a clear understanding of your motivation. Be honest with yourself. Why do you want to sell? Is it to retire or semi-retire, pursue a new venture, or simply to capitalize on the value you’ve built? Or is it something more personal, such as health or burnout? Understanding your “why” isn’t just about personal satisfaction — it’s essential for making confident decisions and communicating effectively throughout the sale process.
Why this matters
Buyers can tell when an owner is not fully committed to selling. If you can clearly articulate your reason for selling, you’ll build trust with potential buyers and make your business more attractive. For example, a motivated seller with a clear reason — regardless of what it is — sends a strong signal that the sale is genuine and well-thought-out. I remember saying, “I’m pursuing my three H’s: Health, Husband, and Home.”
Tips for gaining clarity
- Reflect on your goals. Take time to write down your reasons and evaluate if they align with your long-term vision. I’d also warn that if you can’t put it in writing, you probably don’t have complete clarity.
- Consult trusted advisors. Speak with mentors or business coaches who can provide perspective. If you’re feeling like you need more clarity, ask me for a free discovery call.
- Visualize your future. Picture life after the sale and be certain you feel excited about what’s next. If you’re having a little trouble with that, check out my tips for visualizing.
Do not overlook this step! Gaining clarity on your “why” is one of the most vital steps to take before selling your business. It sets the stage for the entire process and ensures you are mentally prepared and confident.
2. Clarify what you’re offering (and its value)
Once you have a clear “why,” the next step to take before selling your business is understanding exactly what you’re offering to potential buyers. This means creating a quarterly (or perhaps annual) strategic plan to get a clear picture of the valuation of the business, and considering ways to maintain or improve it prior to offering it for sale.
Before thinking about a purchase agreement, I forced myself to write a 2-page outline that listed, what, exactly, the assets of my business were. It was a grueling exercise, but it was helpful to me, and to any potential buyer. That’s not enough, however.
To provide clarity to the potential buyer, create a comprehensive overview of your business that highlights its unique value proposition, growth potential, and any assets that set it apart from competitors.
If your business isn’t currently thriving as much as you’d like, you’ll need to find ways to add value to maximize its appeal.
Why this matters
The more transparent and compelling your business appears, the higher the likelihood of attracting serious buyers and getting a fair price. Buyers are looking for a business that is not just sustainable but poised for growth. If you can show that the business has room for improvement or additional revenue streams, it will be more attractive. I recommend doing a good old-fashioned SWOT to help you gain clarity and add value. So how can you do that?
Tips for adding value
- Optimize operations. Consider the Donabedian model: Structure, process, outcome. Make sure you have clear structures in place, such as policies and procedures, employee job descriptions, and more. Streamline processes (including project management) and remove inefficiencies to gain the same or better outcomes.
- Strengthen customer relationships. Showcase a strong and loyal customer base. For example, be able to articulate how many names and email addresses you have in your customer management system.
- Enhance your digital presence. Do a mini-audit of your website; make sure it addresses my 25 tips for an effective website. Ensure that your social media channels reflect the business’s value and brand.
- Consider investing in key areas. It may benefit you to make strategic investments that can drive value, such as new technology or training for staff.
- Prepare thorough documentation. Create a comprehensive business portfolio that includes financial statements, contracts, key metrics, and other relevant documents. This transparency will make the due diligence process smoother for buyers and it will position your business as a valuable investment.
In anticipation of a buyer doing due diligence, I made a checklist using multiple items in six key categories:
- Finance/Tech
- Team
- Operations
- Marketing
- Sales and Customer Experience
- Products and Services
3. Execute the transaction with confidence
The final step to take before selling your business is the actual transaction process. A business transaction is the formal process of buying or selling a business or its assets. It’s a one-time, finite process that typically culminates in the transfer of ownership; it’s about money changing hands. This process involves everything from listing your business to making verbal presentations in a board room to getting written legal negotiations until it culminates with finalizing the sale.
Why this matters
This stage is where your preparation pays off. A well-executed transaction plan reduces stress and helps ensure that the sale meets your expectations. It’s also the stage where having clarity on your “why” helps you stay firm on your terms and make decisions that are in your best interest. This might include knowing when to walk away from the deal, as I explained in a previous post.
In another post, I described the terminology you’ll need to know for the process of selling your small business. Go in armed with this knowledge.
Do not confuse “transaction” plan with “transition” plan. A transaction is the one-time process of shifting from one state of ownership or management to another. A transition is the ongoing process of ensuring the smooth transfer of power to achieve future business objectives. (My buyer declined my offer to draft a transition plan, and consequently, the transition was very stressful.)
Key actions:
- Engage professional help. I didn’t use a business broker, but you may want to consider it. I engaged a contract attorney, but in retrospect, I might have done a little better by hiring a Mergers and Acquisitions (M&A) attorney. I also worked with my bookkeeper and CPA. You might want to work with a business coach, too. In short, find experts who can help you find qualified buyers, negotiate terms, recognize pitfalls, maximize value, get in touch with understanding your why, and process all of the relevant facts related to the transaction.
- Conduct thorough buyer vetting. From a financial standpoint, be sure potential buyers have the capability and motivation to complete the purchase. However, you’ll also want to raise other questions (e.g., “Do you plan to re-sell the business?”) and confirm that the buyer’s values align with yours. If you get an uneasy feeling, trust your intuition and slow down.
- Prepare for due diligence. Make sure all requested information is available and organized for the buyer’s review. Document what information you have provided. In my case, I asked my attorney to add a line in the asset purchase agreement that the buyer had been given all the requested information and found it satisfactory.
- Consider tax implications. Consult with a tax professional to understand the tax impact of the sale and plan accordingly.
Tips for finalizing the deal
- Negotiate terms. Be prepared to negotiate not just on price but on terms that impact your future, such as transition assistance or non-compete clauses. I explained this in more detail here.
- Legal Review. Continue working with your attorney to review all sale agreements before signing to make sure everything aligns with your goals.
- Celebrate and Transition. Once the sale is finalized, celebrate your achievement and prepare for a seamless handover that sets the new owner up for success.
Executing these actions is one of the most important steps to take before selling your business to ensure a smooth and successful sale.
Sell with confidence
Preparation is everything, and with the right game plan, you too can make all your goals for selling your small business a reality. Find your “why,” articulate the value you are offering, and approach your closing with confidence. And if you need help, just ask — I’m only a discovery call away!
This post was first published on my Medium blog—follow me there for the most up-to-date entries!