For many entrepreneurs, selling the company they built from the ground up is a lucrative opportunity that will set them up for retirement or their next business venture. However, a successful sale is not as simple as finding a buyer and signing some paperwork. There's a lot of preparation and planning that goes into an acquisition, and any founder who wants to sell their company must be ready for that process.
Below, a group of entrepreneurs shared seven best practices founders should follow when they're looking to sell their business. Follow their recommendations to ensure a smooth transition into the next phase of your career journey.
Start planning early.
Selling your company shouldn't be a spontaneous decision. In fact, the ideal time to start strategizing about selling your business is two or three years before you're ready to close, says Doug Bend, principal of Bend Law Group, PC.
"Buyers often require two or three years of tax returns and financial statements when negotiating the purchase price," Bend adds. "By planning ahead, you can best position yourself to not only sell your company, but to also get the highest purchase price possible."
Put solid systems in place.
When preparing to sell a business, a founder should ensure they have solid systems in place and that all team members are well-trained in them, explains Richard Fong, CEO and founder of Automatic Growth.
"When everyone knows what to do, the entire business runs smoothly -- from sales to production -- making it far easier for new owners to come in and take the reins of the business," Fong says.
Determine your business's worth.
Before you put your business up for sale, you'll want to determine what it's worth so you know how much to ask for.
"You'll want to get a valuation of your business before moving too far along in the selling process," says Thomas Smale, founder and managing director of FE International. "This will help narrow down your list of potential buyers and determine the best buyer."
Have your numbers ready.
Your businesses financial records will be an integral part of the due diligence process when you sell. That's why Matthew Capala, CEO of Alphametic, recommends hiring a CPA to audit your business and create financial projections for the incoming owner.
"These are the fundamentals that a new owner will be looking at -- if you made it work, how you made it work, where there are margins they would change," Capala says. "Then you can create collateral that supports a roadmap for a new owner. Do not skip the numbers preparation."
Leave your emotions out of it.
Many entrepreneurs feel personally attached to their business and see it as a part of their core identity. As difficult as it is, it's imperative to separate your personal feelings and not get emotional about any sale decisions.
"Your decisions should be based on your sound mind as an entrepreneur, transparency as the CEO or reports as a business owner," says Daisy Jing, founder of Banish. "It should not be based on your heart thinking that this business is your baby, with your eyes closed about its flaws and bias on its value. Be real and have a sound judgment in everything."
Consider your brand's future legacy.
It's easy to sell a business and walk away, but the company you built should have a long-lasting legacy, says Firas Kittaneh, co-founder and CEO of Amerisleep Mattress.
"Even if you're no longer leading the business, it's important that the new team is equipped to handle the upcoming challenges and, more importantly, will treat your brand with care," Kittaneh adds.
Plan for what happens after the sale.
According to Kris Garlewicz, chief financial bodyguard at ProsperiFi, entrepreneurs who sell their business must have a game plan for what happens next.
"The most successful exits happen when the entrepreneur has a clear strategy on what happens after the exit," says Garlewicz. "It clarifies the reason to exit, it eliminates the distractions that come with the new free time and, most importantly, it brings a level of purpose to the journey."