8 tips for a smooth business sale

Sooner or later, as a self-employed entrepreneur, you'll face the question of how to arrange your succession. Maybe you've already decided to transfer your business to your children, sell it to an employee, or to an unknown third party. How do you handle the business sale?

1. What does the sales process involve?

Every sales process is unique. We distinguish at least the planning phase and the execution phase.

• The planning phase is time-consuming and intended to optimally prepare the company for the sale. Thorough and detailed planning increases the chances of positive feedback from potential buyers.
• The execution phase usually consists of a basic analysis, valuation, choosing between a family transfer or finding a suitable external buyer, due diligence, and financing by the buyer, and a final negotiation phase until closing.

2. How are price expectations determined?

It's normal to have high expectations for the price of your life's work. Many owners believe their company is worth more than it actually is. Common reasons for this misconception are:

1. No objective assessment of the strengths and weaknesses.
2. Not acknowledging that the company is (too) dependent on their personal involvement.
3. Unrealistic expectations based on rumors about acquisition prices.
4. Price expectations based on multiples for much larger publicly traded companies.
5. Price expectations based on investments from the past.

It's important to recognize that the paid price is just one part of a successful business sale. The terms of the deal and any additional modalities are also important.

3. How much time can you invest in the sales process yourself?

The time and effort needed for a business sale are often underestimated. While external advisors handle much of the administrative work, your involvement is crucial. The involvement of the owner versus external advisors changes in each phase of the sales process.

• The highest involvement is expected at the start of the process and when closing the deal.
• Compiling the dossier, valuation, and finding a suitable buyer is usually outsourced to a specialized takeover broker. Nonetheless, your involvement remains important.

4. What is the correct reason why the company is for sale?

The reasons for the business sale are of great importance to the buyer.

• A clear reason such as end of career is transparent.
• A sale due to health reasons might scare off the buyer.

Common reasons for the sale:

• End of career and no successors.
• Company is too small to survive in a consolidating market.
• Other projects (such as a fresh start in another sector).
• Restructuring (divesting non-core activities).

5. Do you want to remain active after the business sale?

Most buyers want the former owner to be available for a certain period after the business sale.

• Your future role can range from a consultant available on call to a full-time employee.
• Your availability depends on the company, your previous roles, specific competencies, and the preferences of the buyer.

Your presence is less required if you have invested in a strong team long before the planned business sale.

6. How can confidentiality be maintained?

It is important to maintain confidentiality until the transaction is closed.

• Use a code name during the sales process.
• Have potential buyers sign a non-disclosure agreement.
• Limit communication with non-involved parties.
• Prevent information leaks through staff, customers, or suppliers.
• Run the business as if you are not going to sell it.

7. Who can best advise you?

For larger transactions, we distinguish three types of takeover advisors:

1. Takeover broker (M&A advisor): Advises on valuation and drawing up a business profile.
2. Specialized law firms: Legal aspects of the settlement.
3. Tax advisor: Helps in preparing the company for sale and optimizing the transaction structure.

8. Common mistakes in business sales

1. Lack of self-reflection.
2. Insufficient methodical approach.
3. Underestimating the time and effort required.
4. Unrealistic price expectations.
5. Focusing on the highest price and underestimating deal conditions.
6. Possible conflicts of interest with external advisors.

With this information, you can better prepare for the sales process, increase your chances of a successful sale, and avoid mistakes.

Would you like more tailored advice for small business owners looking to sell?

For small businesses with an expected value of less than €500,000, UNIZO business transfer also offers a guidance trajectory tailored to self-employed entrepreneurs.