When we meet with new clients, we often find that they have some misconceptions about selling their business. That’s only natural, so we present three non-negotiable best practices right up front. We’ll share them with you here, no charge.
Number One: Communicate Internally
When it comes to the people you depend on, you can’t overcommunicate during this process. If you don’t communicate with the leaders on your team, they are going to fill in the blanks with their own narrative, and that isn’t good. These are people you’ve trusted with your most sensitive data for years, what just changed? Why stop trusting them when you need them most?
We’re talking about key people. Your Chief Financial Officer is probably critical because the sale process is heavily dependent on financial metrics and documentation. Additionally, your Chief Operating Officer will likely be vital, as a lot of due diligence revolves around systems, operations, and processes.
This doesn’t mean you make a general announcement to the entire organization, just your key people. You may even want to incentivize them to stay on throughout the process, which goes to our next point.
Number Two: Stay the Course
We cannot stress this enough, keep running your business as if nothing has changed. Because in truth, nothing may change. Not every proposed sale goes through. This can be challenging. You’ve made the decision to sell your business, and you’re excited about the next phase of your life. But you must stay focused on your business.
The number one factor that prevents a deal from going through is declining performance during the sale process. Selling a business takes time. Don’t take your foot off the gas and let yourself become distracted. Sprint through the tape.
Number Three: Disclose, Disclose, Disclose
Be clear and up front throughout the process. Any kind of hide-the-ball practice will fail. If there’s an issue and it concerns you, it will be discovered during the sale. And if it’s discovered after the sale, that can be even worse. You can’t get into trouble by disclosing.
This isn’t to say every customer complaint or employee grievance you’ve ever had is an issue, there are always judgment calls. That’s what your attorney is for. If you’ve built a solid team to help you with the sale, you’ll have professionals to help you decide what should be shared. If it’s substantive, make sure the buyer knows about it.
We help clients build their disclosure schedules. If you’ve set forth an issue and the buyer signs off on it, that means it’s disclosed and agreed upon. You might be surprised at a buyer’s reaction when you’re honest about an issue.
During a sale we led a while back, there was an unfortunate industrial accident resulting in a serious injury. Our seller disclosed it immediately. The purchaser’s response was sympathy and concern for the injured employee, and then a request to review the insurance coverage. Once everything checked out, the sale went through. Things happen, buyers understand and accept that. Nobody likes to be blindsided.
Rules to Live By
These three concepts are nonnegotiable. Trust and involve the people who have helped you build to where you are, keep running your business well throughout the process, and be honest about potential issues.
We’ve spent years helping business owners successfully move on to the next chapter in their lives, and we’ve seen pretty much everything. These three, simple rules have always served us, and our clients, well.