For entrepreneurs who have built a business from the ground up, selling it is a defining step. Years of sweat and sacrifice come down to a single event. But many founders who haven’t properly prepared are being harmed.
A sobering reality is that most businesses either sell or fail. Very few IPOs. Since a sale is the most likely positive outcome, you can create tremendous value by planning early.
Ill-prepared companies can fail to sell or sell at a much lower valuation, giving up 10%, 20% or even 30% of the potential price. If you’ve spent 10 years building your business, that’s like wasting three years of hard work.
Good preparation means more than generating income. Put yourself in the buyer’s shoes. They are approaching a deal with huge information asymmetry, even after extensive due diligence.
To maximize the price of your business, you must minimize buyer risk and maximize your value to them. Here are six ways to do it:
Highlight your key talent
Be honest with yourself about your team. Sometimes the people who brought you here aren’t the ones who will take you to the next step. Improve key talent as you scale and implement talent risk mitigation strategies, such as succession planning.