While there is a lot of talk in business circles about ‘scaling’ and ‘exiting’ your start up business, it’s difficult to come by accounts of what it is really like to sell your business. When should you do it? How should you prepare for it? How long does it take? Do you need expert assistance? What does the right buyer look like?
We asked three incredibly successful, award-winning female business owners who’ve recently sold their businesses to give us their inside tips and advice, based on their own experience. Thanks to these innovators and industry disrupters for graciously sharing your accumulated wisdom.
Irene’s top three tips on preparing a business for sale are:
There is a lot of advice out there for those looking at selling a business, but in my experience not all advice is good advice. You’ll meet many people along the way who might be very senior or have long LinkedIn profiles, who have various opinions about what you should be doing with your business; new revenue schemes, going into new markets or pivoting what you are currently doing to increase revenues.
It’s important to remember that no one knows your business, is more passionate about what you are trying to achieve or has more invested than you!
One of the hardest things about selling a business is having two very demanding full-time roles at once: running the business as usual while keeping revenue and profit up, as well as selling the business. Selling a business can take anywhere from 3 to 12 months so it's a marathon rather than a sprint.
Steps such as creating the right documents and pitch deck to go to market, finding the right advisor, getting in offers, working with lawyers, going through due diligence and then negotiating a very long legal contract are all often out of the realm of the CEO, and can be very overwhelming. I recommend having the right advisor who complements your strengths and weaknesses, to help you navigate and understand the process.
When looking at various offers to sell your business, decide what is most important to you. Sometimes it might be the highest price, but it's also worth considering the earn out period, the commitment on the CEO after the sale, the terms of the payment and a lot more. For example, getting less money upfront and only working for three months in transition might be better than more money and a two-year earn out period working full time for your purchaser. Lots to consider!
I started my business 13 years ago and at the beginning, I never had the plan to grow a National franchise network, let alone eventually exit. It was just me having fun, doing what I loved and seeing children feeling happy, smart and confident. As with everything, the business grows, evolves and adapts over time. I had a small suburban primary tutoring centre and knew that I wanted our Begin Bright program to reach more children. Ultimately, that was the reason why I decided to scale up and start franchising.
The skill set that I required for a start up and then for an established National franchise were extremely different. I like being creative, experimental, trying exciting new things and being agile. But once a franchise gets over 10 sites, it has to be all about consistency, systems and management. As we reached 30 franchisees, I knew that it was time for me to bring in people who enjoyed that next stage of business.
The first stage of deciding to sell is quite an emotional one. As founders, I think we put so much of our heart and soul into the business. It’s not just about the numbers and processes. As a result, we’re usually way more emotionally invested in the business than corporate management and it takes a lot of thinking and planning to work out how to deal with that. A good psychologist and awesome friends come in really handy!
On the practical side, you need a great accountant who can help you to value the business. I still have the theory that a business is only worth what someone is willing to pay for it.
For a tech-based business at the moment, profit doesn’t always seem to be a necessity for a positive sale (always blows my mind)! But in my experience, we worked off profit multiples.
You’ll need a great lawyer to go through the contracts with a fine tooth comb. Because emotions are running high, it’s easy to miss particular things in the fine print. Have someone experienced who can go through it with you and know all the implications of what you’re signing, and look at it through the lens of best-case and worst-case scenario, because a lot will change after you sign on that dotted line.
Once your business gets to a certain size, it’s rare that you will sell and walk away on settlement day. There’s usually a transitionary period or earn out to ensure that the business continues it’s growth without you. For a founder who has had control over every aspect and decision of the business, becoming an employee and not being able to share your opinions or effect change day-to-day can be frustrating.
Be prepared to go through a roller coaster of emotions once it’s done. It’s both a celebratory moment and also a really sad one when such a large, important part of your life that you’ve no doubt sacrificed heavily for, is ultimately away from you and forever out of your control. You have to say goodbye to the team you worked so closely with, who supported your business, and you’ll need to find a new normal. It’s liberating, scary, exciting, euphoric and heart breaking, all at once.
Personally, I know that there are so many new things that I want to do in this wild and crazy life journey. The building and selling of businesses is going to be a part of that, because I can’t bear the thought of doing the same thing for the rest of my life. People sell businesses for all kinds of reasons and if you’re deciding to sell yours, negotiate well to get your value, leave well and move on to the next adventure!
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