How To Sell A Business – The 16 Steps

By Generational Group

10/19/2012

I recently came across an article on Business Insider that examined the 11 stages involved in finding and closing a deal with an optimal buyer. It reminded me of the chart we usually show attendees at our M&A conferences – although in our case, the process we use typically breaks down into 16 steps, not 11.

Either way, the reality is that selling your business on your own, without professional representation is a long, tedious, detailed process. This is how the folks at Business Insider describe it:

“Selling a company is a long and complex process. Preparing for a sales process takes at least 12 months, and then the actual process itself can take another 12 months. If you think of selling your business as something similar to a very long multi-year enterprise sales cycle, you’ll begin to realize that a business sales process is like any other sale process in that it can be broken down into its core component stages and elements.”

We concur – although the time frame can be made much shorter if you use a professional M&A advisor as they will have experience in all facets of the progression and can usually speed the entire process up. Based on our experience, here are the 16 steps that you will need to take in order to find a buyer for your business:

Each of these steps is vital to the eventual successful sale of your company. And even though each of these is equally important to do correctly, perhaps the two most important ones that form the foundation of the entire process are the evaluation and value enhancement stages. In reality these two go hand in hand. The evaluation of your company will discover and highlight both your strengths and your weaknesses.

The Critical Two-Step

We all like to focus on our businesses’ strengths; however, value enhancement and improvement comes from identifying weaknesses and developing strategies to improve them (value enhancement).

A good number of our clients come to us already “buyer ready.” That is they have taken key steps along the way during the development and evolution of their companies to position them to be immediately attractive to buyers.

For others though, the evaluation is a useful tool because it allows the business owner to look at his/her company with a completely objective viewpoint and understand how a buyer might view the organization.

Naturally, not all business owners appreciate the idea that the business they have poured sweat equity into for years may not be attractive to buyers in its present condition. But the reality is that you can possibly improve your value and sometimes even your deal structure by applying some fundamental strategies.

As we have discussed in previous articles, buyers try to reduce the risk associated with an acquisition target. In advance of going to market, you can do this by implementing some ideas that you will learn about your company during the evaluation phase.

Changes and improvements you may need to make will vary from company to company. Some key areas of risk that buyers are keen to focus on include:

• Owner dependence
• Customer concentration
• Lack of reliable financial documents
• Overly aggressive growth projections
• Unrealistic value expectations
• Poorly prepared valuation documents
• Lack of groomed middle management
• Expense ratios not in line with industry norms

This is just a short sample list of typical value enhancements that can be implemented prior to taking your company to market that can make it appreciably more “buyer ready.”

The knowledge of what needs to be improved upon is, of course, based on the evaluation of your company. Since this is such a vital step in the process, chances are good you will need professional help in order to adequately analyze your business.

As Business Insider points out several times in its article, you can find a buyer without help, but if you want to close a deal with an optimal buyer at a premium value that has a beneficial deal structure for you, a M&A advisory firm is highly recommended.

Knowledge is Key

If you would like to learn more about all of the 16 steps involved in the mergers and acquisitions process, I recommend that you attend one of our no-obligation, educational M&A seminars. We hold these throughout North America and they are designed to help you protect your interests if you do need to approach buyers without representation.

The most important concept you can take away from this article is that even though all 16 steps to a successful sale are important, the first two – because they set the foundation for the entire process – must be done correctly and completely.

If you plan on marketing your company without the aid of an M&A firm, at least hire a business consultant or accountant to help you prepare the evaluation documents that you will need.

FAQs:

How do you sell a business the right way?

Selling a company is a structured process, not a single event. It generally moves through preparation, valuation, value enhancement, marketing materials, buyer outreach, negotiation, due diligence, and closing, with each stage building on the last.

What are the most important first steps before going to market?

The first question many owners ask is, “How do you sell a company?” Preparation and an objective evaluation of the business tend to matter most. Understanding strengths, weaknesses, and how a buyer will view the company sets the foundation for everything that follows.

What is a CIM, and why does it matter?

A CIM, or Confidential Information Memorandum, is the core marketing document that presents the business to qualified buyers. A well-prepared CIM helps buyers see the value and opportunity in a company clearly and consistently.

Do I need an M&A advisor, or can I handle the sale myself?

When researching how to sell a business, many owners wonder if they can manage the process themselves. An owner can pursue a sale alone, but an experienced M&A advisor manages the detailed steps, works to protect confidentiality, and reaches a broad set of qualified buyers. This support can free the owner to keep running the company during the process.

How is confidentiality handled during a sale?

A structured process is designed to protect sensitive information, typically using non-disclosure agreements and a controlled release of details. While no process can promise absolute confidentiality, careful management reduces the risk of exposure.

What is due diligence, and how should I prepare?

Learning how to sell your company includes knowing what to expect at this stage. Due diligence is the stage where a buyer verifies the information behind an offer, often through hundreds of detailed questions. Organized financials and documentation prepared in advance help keep the process on track.

Why does having more than one buyer matter?

Relying on a single buyer can limit an owner’s options and leverage. As Generational often frames it, one buyer is no buyer; a competitive process is designed to create broader market exposure and healthier negotiating dynamics.

How can Generational Group support the sale of my company?

Generational Group guides owners through its 16-step approach, from preparation and valuation to buyer outreach and closing. Owners can also learn the full process at a complimentary “The Generational Exit Strategy Conference” before committing to a sale.

Carl Doerksen is the Director of Corporate Development at Generational Group.

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