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Selling your business (Part 3)

By: Olivier Barbeau – regular contributor

In the third part of this six-part series on selling your business, we look at finding the right buyer

You’re mentally prepared and your advisor is on board. But what’s your target market?
Selling your business is like dating. To be successful, you need to be clear about what characterises Mr or Ms Right. Once you know, you can dress up your sales pitch to appeal to these buyers, advertise wherever they hang out and present your business in a way that attracts them.

Your business has a different value to different buyers. You want to attract the ones who can realise the most value as they will be more likely to meet your terms.

A common way for buyers to add value is through links with their existing businesses, especially when such links are exclusive. For example, many software developers offer a unique product but their businesses fail to grow because they lack the distribution network to maximise the potential market. These smaller companies are often attractive acquisitions for global software corporations because their products are a good fit and the corporation can apply the power of their international sales force to distribution.

Different types of buyers have different needs and expectations, so discuss these with your advisor. This will clarify the most likely type of buyer/s and will help you to present the business in a way that appeals to them.

It’s not all about money
The right buyer is, first and foremost, the one who will pay a fair price for the value of your business, including a share of the synergies to be enjoyed.

However, it’s important to be clear about your non-financial expectations too. Only you can decide what these are and prioritise them. In my experience, five common non-financial considerations are:

  • Transition. The buyer’s needs around the handover period and whether you remain with the business afterwards in any capacity needs to match yours.
  • Continuing obligations. The undertakings that protect the buyer. For example, the extent and length of warranties and indemnities to the buyer, or a restraint of trade agreement.
  • Funding. A buyer must have the money. This may take time to confirm, but lack of funds is a real time-waster.
  • Timing. Perhaps their internal approval process is complex or their bank is slow - whatever the reason, you may have to forgo a buyer who cannot settle in time if you need to meet an inflexible end date.
  • ‘Sleep soundly’ factors. You cannot expect to influence decisions about your business once someone else owns it. However, if there is something you could not live with, you must discuss it and, ideally, include it in the sale contract. One example is guaranteeing a job for a family member who is your employee.

Read the full feature in Cold Link Africa January 2016 page 37.

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