3 steps for planning to sell your business

for saleMany entrepreneurs assume that what made them successful will translate into a lucrative sale of a company, but selling a business is a much different proposition than building it.

“Entrepreneurs are experts at creating, nurturing and growing their businesses,” I recently told a group of private business owners during a luncheon for successful entrepreneurs.

Heads nodded in agreement.

“You know how to grow your business or you wouldn’t be sitting here,” I continued, gauging my audience’s reaction as positive.

James D. Shields, Contributing Writerwww.bizjournals.com

“Weren’t you methodical, deliberate and strategic when you grew your company to its current success?”

The rhetorical question was met with more acknowledgment.

“Remember all of those sleepless nights, the mistakes you made, and the time and energy you invested to become the success you are today?”

This statement actually caused several people to laugh out loud and shake their heads.

Then I landed the bombshell.

“The mindset you used during the creation and growth of your business does not work when you want to sell it.”

Silence came down as CEOs glanced away, pondering my statement.

I let the silence continue for several beats, and then added, “There are three steps you must take before even beginning to consider selling your business.”

I now had their full attention and shared the following:

1. What is your strategic plan?

There are three main questions ask when preparing your strategic plan:

  • What problems are you trying to solve?
    • The owner must be clear about the problems he is trying to solve. Positioning his company for his children takes different action steps than to groom it for a sale. Discussions with family members, other owners and a determination that the company will survive the founding owner’s departure are just a few of the problems that can surface.

 

  • What are your personal and business objectives?
    • Once the problems are identified, the personal and business objectives of the owners must be clarified. It is easier to list the personal objectives as a springboard for the business goals, but do what works best for your particular situation. Write down and flesh out each set of objectives, until you are rock solid on their validity in your landscape.

 

  • Can you create alignment between these objectives?
    • Once your personal and business goals are stated, the next step is to determine whether these goals can be aligned. For example, a business that relies heavily on its founder to generate new business will not be an easy sell if the founder is retired. The key to finding alignment is to prioritize your personal and business goals and then see if they can be aligned.
      These questions are just the starting point to plan for the strategic succession or a sale of your business. After you have clearly defined your objectives and see that alignment is possible, the next step is to create a strategic and tactical plan, and hire a strategic advisor to execute.
      You planned your success your entire life. Now is the time to plan for your exit. Life events can be disruptive. But just like Bob, you will leave your company and your family in a stable position when you plan for the future. Knowing the final destination and having a clearly defined roadmap makes the journey worth taking.

The resolution of these questions forms the foundation of your strategic plan, which guides your decisions as you move through the transition phase of your business. Think of your strategic plan as your roadmap to your final destination (as you have defined it). It is the bird’s eye view of your ultimate goals.

2. What is your tactical plan?

The tactical plan usually involves a much shorter horizon than the strategic plan, because it contains specific, short-term action items. These action steps implement the strategic plan on a day-to-day basis. Measurement and appraisal of progress should be conducted on a consistent basis and adjustments made as necessary. Think of the tactical plan as the physical and mental decisions required to drive a car from one destination to another.

3. What is your execution plan?

Finally, a decision must be made about the driver of your transition team. A strategic advisor who understands your overarching goals is critical to reaching your final destination. The person in charge should also be knowledgeable in the five critical areas that must shine during a due diligence review conducted by a potential seller.

  • Contract review/processes
  • Finance and reporting
  • Corporate structure
  • Human capital
  • Conflict/risk management

Each of these areas supports a successful business model, regardless of industry. If any of these areas are not running efficiently or effectively, the overall health and viability of the company is affected. And ultimately, the enterprise value for a potential buyer.

In general, many entrepreneurs assume that what made them successful will translate into a lucrative sale of a company, but selling a business is a much different proposition than building it. Isn’t your life’s work worth the effort to transition to the best and highest result, as defined by you?

 

 

James D. Shields is founder and principal of Shields Legal Group. An entrepreneur at heart, he has owned or invested in numerous companies, and he has advised C-suite executives and business owners on strategy, risk evaluation and resolution to enhance shareholder value and grow revenue. The creator of Growth to Exit, Shields shares his business acumen and strategic planning skills with middle-market companies in transition to higher enterprise value or succession planning.