If you are thinking of selling your company, you should begin by setting out the goals you want the sale to achieve. This article explains each of these goals in more detail.
Who should I sell my company to?
Your ideal buyer is closely bound up with your other objectives for the sale and has a marked effect on the entire sales process. Ask yourself the following questions:
Do I want to hand the company over to a family member? Would I prefer to pass it to my business partner or to one of my key employees? Do I want it taken over by someone already working in the same field? Or should it go to a financially strong partner who can take it to the next level?
Once you have answered these questions, you will have a clearer idea of who you want to sell your company to. Alternatively, there are firms that specialise in buying out companies and s.r.o. businesses.
Over what timeframe should the company be sold?
This, too, depends on your preferences. Do you want to sell straight away, or in a year’s time?
A far better approach is to plan the sale over a longer period, ideally at least one to three years ahead. A somewhat longer horizon appears to be ideal, however, and experienced business owners tend to sell over a period of three to five years. Why does this help? The answer is simple: it gives you enough time to prepare the company properly for sale.
What should the end result of the transaction look like?
In most cases, owners sell their company because they no longer wish to be involved in it. But are there other options? Yes, there are. You could sell only part of the company and remain actively involved. Alternatively, you could sell the entire company and still play an active role, or become an external adviser to it. The advantage of this arrangement is that the former owner no longer has to be involved day to day, while the new owner can benefit from his or her experience of running the business.
What financial outcome should the sale deliver?
A key question when selling a company is how to turn it into cash. This is not simply a matter of setting the sale price, but of the overall financial gain from the sale. Bear in mind that a sale brings not only income but also certain costs, so your total financial return may differ from the sale price.
What payment terms do you have in mind for the transaction?
The best option is, of course, payment in full on handover of the company; with creditworthy buyers, however, partial deferred payment or payment in instalments can also be acceptable.
Buyers from larger companies often favour a so-called earn-out agreement: if the company achieves certain results within an agreed period, the previous owner receives a bonus. This could be an attractive incentive for you.
Are you considering staying on in the company?
This question mainly concerns smaller companies that depend on their owner personally. A critical factor is therefore often the transfer of roles and responsibilities to the new owner, or to a manager appointed by the new owner. In some companies this means that the original owner stays on for a time after the sale, under the new owner’s direction, gradually handing over all executive functions. This period varies from case to case and may last anywhere from three months to, say, three years. Before selling, you should decide how long you are willing to remain in the company under its new owner.
Do you care about how the company operates in future?
Is it important to you that the new owner keeps your current staff, or are you looking instead for a buyer who will reorganise the company and merge it into their own successful business?
Your answer to this question can help you decide on the most suitable strategy and the best way to achieve it.
