4 Critical Questions to Ask Yourself Before Selling Your Business

The second bite of the apple is sometimes better than the first — particularly for entrepreneurs whose initial “bite” was building a business, selling at least part of the company, and savoring the reward. Owners who maintain a vested interest in the business’s performance after that successful partial sale can plate up an even sweeter second bite for themselves.  

But how can you reach such an appealing position?

For you to bring that kind of business exit to fruition, you need to lay out an exit plan to sell your business so you get exactly what you need from the transaction.

Don’t underestimate the need for a fleshed-out business exit strategy, though. The more specific your exit plan, the more likely you’ll be to avoid making short-term decisions that don’t meet your long-term goals.

Don’t Go ‘Full-Improv’ When You Sell Your Business

Selling a business is often less about a defined script and more about improv, but the stronger your plan, the likelier you’ll be to see your exit objectives fulfilled. Certainly, selling your business will require some last-minute pivots, as most owners end up going “off-script” now and then to meet changing situations. Nevertheless, having in mind a desired endgame is critical to ensuring that you don’t veer off course midstream.

Business exit strategies can drive a wide variety of ultimate goals. For instance, your goal might be to maximize your financial outcome while still having a vested interest in the business — in other words, to keep enjoying that apple you grew. Your goals might also include selling to someone who will take great care of your employees and protect your brand legacy. In that case, the selling price could play a secondary role in achieving those objectives.

In other words, selling a company is more than a transaction; it’s an introspective process of determining the goals or objectives you’d like to achieve with the sale. Before you embark on the nitty-gritty of exit plan creation, you should take a step back to evaluate your true priorities when finding buyers for your business. To help you make business exit planning choices, start by asking yourself these questions:

1. Am I really ready to sell?

Believe it or not, some entrepreneurs never consider whether they’re mentally, emotionally, and logistically ready to sell some or all of their business. They just assume they’re prepared to let go. Sometimes they’re not, which can lead to remorse — even if they receive a hefty payout from the sale.

How do you know that you’re ready to sell your business? That’s a personal decision. Some founders decide to give it up to launch other organizations. Many leave to pursue hobbies or passion projects.  

Remember that selling is a long, difficult, and complex process. If you’re not fully committed, it will be more challenging for everyone. So make sure you feel comfortable moving forward.

2. Are my financial expectations consistent with my business’s worth?

Understanding how to price a business for sale can be a stumbling block if you don’t recognize the way the process works. You might have an idea of how much your company is worth, but until you begin, you won’t know what the market will bear.

Think about how this could hypothetically play out: Let’s say you’re expecting a sum seven times higher than what buyers are offering you. You might have unrealistic valuation expectations. Sellers expecting too much from buyers can be a top reason for business sales to fail.

Many experts recommend starting your exit exploration by soliciting an objective third-party opinion on your organization’s value. The challenge, though, is finding a suitable person or firm to do this. In our team’s experience, many business brokers and investment bankers will suggest a very high price in order to encourage you to sell the business. The good ones won’t, but many will.

3. What do I expect from my buyer?

One of the most overlooked steps to selling a business is writing down what you hope your buyer brings to the table. Of course, you want one of those assets to be money. Yet money isn’t everything, and many sellers ultimately regret making money their top (or sole) criterion.

Maybe instead, you want to see your brand legacy grow in a certain direction. Not all buyers will be open to meeting your standards. Be candid with yourself about the type of buyer you’re comfortable having handle your business.  

Remember that it’s OK to turn down offers, including high-priced ones, if they don’t seem like a good fit. Again, if you’ve spent time crafting an exit plan, you’ll have a strong baseline to refer to during negotiations. The toughest part of selling isn’t always about finding buyers for your business; it’s frequently finding buyers whose visions align with your own. 

4. What role do I want post-close?

Tons of entrepreneurs stay involved with their businesses post-closing, so give plenty of thought into your desired role post-sale. Picture yourself a few months or years after the sale closes: What do you hope to be doing in terms of the company?

For example, you might want to exit entirely and just let someone else lead the organization into the future. On the other hand, you might want to hold onto a job as a consultant or member of the board of directors. Everyone has different preferences, but our team at Four Pillars Investors prefers the latter. Offering up that experience can be invaluable for the company. You have tremendous insider knowledge that could be an advantage to your buyer. Feel free to leverage your unique qualities so you get the post-close experience you want.

Selling your business can undoubtedly allow you to get more from the fruits of your labor. Just make sure that you set yourself up for success before taking your second bite.

Let’s have an exploratory call.

Most private equity firms are focused on exploiting your company for as much monetary gain as possible. That’s not us. We want to ensure this is a mutually beneficial agreement for you, your employees, and our firm.

On our first call we would want to hear about:

• Your values, why you started this business, and what you love about it

• Your goals and hesitations in finding a potential partner for growth

• We’ll share more about our approach and the process

We will not get into financials unless you absolutely want to