Preparing to sell your business
This perhaps rather ominous adage, often attributed to Abraham Lincoln, rings true as we reflect on the conversations we regularly have with our entrepreneurial clients. Preparation is key as you approach the sale or listing of your business.
Yet we understand most business owners are so busy focusing on running their organisations that preparing themselves and their families for a sale can take a back seat. We strongly recommend, however, that this planning process starts as much as two years before the anticipated transaction.
The importance of giving early and detailed consideration to these matters cannot be overstated. Experience tells us that if they are left to chance, opportunities will be missed and both immediate and long-term financial returns will suffer as a result.
There are a number of key areas that we find can often be overlooked as you approach your transaction:
What are your family’s short, medium and long-term goals and aspirations? What do you hope to achieve from the sale?
Is this the conclusion to a successful entrepreneurial career or the start of a series of entrepreneurial endeavours? Is this the realisation of a long-term aspiration to secure you and your family’s financial future and time to take some chips off the table, or is time to double down so you can continue to participate in any potential future upside in the business? Is it a combination of all these options?
Ascertaining what your goals are early on can have a material impact on the shape and form of the deal you agree to. Clarity regarding your destination can make the journey much clearer and help you be decisive at critical moments in commercial negotiations.
We often find that families’ broader medium to long-term financial objectives fall into four main categories, and their objectives are often a mixture of the following:
Spend: The amount required to support your lifestyle, with the assumption that this pool of wealth will be spent in your lifetime.
Divide: A set amount of money identified to divide between the next generation and your philanthropic causes.
Preserve: To create a strategy and family culture that enables wealth to last through multiple generations.
Grow: To create a strategy and family culture that enables wealth to grow in perpetuity.