Finding a buyer with the credentials to take over your business is only the first hurdle you need to jump when selling up. An even tougher step to take is agreeing the terms of a sale with this individual.
Achieving this will require some tough conversations and strong negotiations. Here are three conversations you’ll need to in order to successfully navigate to complete a business sale.
1. Determine the value of your business
The value of your business is subjective, and will be a key point of negotiation between you and a buyer.
You can present buyers with objective figures such as your annual profits and the value of your assets - and their lawyers will certainly be inspecting your accounts to see if these numbers add up - but the final offer from the buyer will be based on their opinion on the company’s potential for future prosperity.
A common equation used to determine the size of a bid is (annual profits x multiplier + assets). In this case, the multiplier will be your key point of negotiation.
2. The terms of the sale
A common stalling point with the terms of a sale is the future of the seller. Often, the buyer will want you to remain with the company for a period of time in an advisory role, to ensure a smooth transition between owners.
They may want you to remain as their employee, or as a contractor. Either way, if this doesn’t match with your personal goals for the future, it’s important to let them know early in the negotiations.
It’s rare for any buyer to take on a financial company without some sort of assistance from the seller during the transitional period, so you may have to agree some form of compromise here. It’s likely you’ll also have to sign a non-competing agreement that’ll prevent you from setting up a similar company to theirs in the same region.
3. What direction the succession plan should take
It’s likely you’ve created a winning company culture with goals and values you’d like to ensure remain in place after you’ve gone.
While you can’t expect the buyer not to add their own personal touch, it’s worth speaking about your vision for the future success of the company. It’s in the buyer’s best interest to continue what has been working well for your business, so it’s unlikely there’ll be major stumbling blocks here, but it’s definitely a discussion worth having.
Stand up for yourself
These are unlikely to be conversations where terms are agreed instantly. It’s likely there will be give and take from both sides, but you should never be happy to bend over backwards to meet the buyer’s needs. Your own personal future is at stake, as well as the futures of your employees, clients, and everyone affected by your company.
Stand up for yourself, while also considering the buyer’s point of view. If the buyer can do the same during negotiations, you should be able to make it through this considerable hurdle to selling the business.
Succession Link has built an online platform that makes it easy and convenient for you to find the perfect buyer for your financial practice. Click the link to find out how Succession Link can help you.