Over the years, you became an expert at selling products, so much so that it became second nature. Now it is time to sell the business, and suddenly you feel uncomfortable. Many owners become educated by experiencing one or more busted deals. With a little preparation and research, you can help increase the odds of a successful and smooth sale.
It takes years to prepare a company to become a leader in the field; why shouldn’t it take time to get ready to sell the business? However, most owners spend very little time preparing. Buyers are becoming pickier, due diligence is getting longer, and the expectation is that sellers will be at least somewhat prepared. This may be the largest transaction in an owner’s life, so it is critical to be properly prepared. Your product catalog and website might be great, but company buyers are looking for a lot more information, and they will keep asking for more. Finally, an owner needs to prepare emotionally to sell the business—something you do not worry about when selling a PCB or assembly.
Picking the Team
The team that helped you become successful in your field is not necessarily the team that will get you to a great deal. Both your long-term attorney and CPA/tax advisor may be experts in their fields, but they may not be that experienced in M&A (or they may not be “deal advisors” who know how to complete deals). Your wealth advisor might be great with 401Ks and other accounts, but you might be headed into a league above your current advisor. Be sure you work with an estate attorney that you can trust. An experienced M&A advisor will help you set valuation goals, prepare marketing materials, find a variety of buyers, and help guide you to the finish line. An experienced salesperson or rep firm helps find customers for your products—you need a team to help you find the right buyer and make it to the finish line.
Going to Market
It is rare that the "if you build it, they will come” strategy works for your products, and it is the same with selling a business. As an owner today, you may be hounded by callers, e-mailers, spammers, and others who are looking to buy your business or "have a buyer.” Unsolicited buyers may sometimes be the best route and it is a way to keep things quiet. However, if that has not worked or if you wish to go to a broader market, forming a ”go-to-market” strategy is the way to go. Either way, it is best to be prepared in advance.
Picking the Right Customer
Your business probably had a few key customers who helped you become successful. These were customers who became more of a partner than a strictly transactional customer. For most company sellers, you will need to accept some form of deferred compensation as part of the deal, such as earnouts, rollover equity, seller notes, and escrow. You may also want to make sure that the buyer will be a good custodian of your employees, customers, and other stakeholders. That means that you do not jump at the first deal but take the time to review a variety of buyers, spend time with them at meals or other events (golf, pickleball, etc.), go visit them, and ask for references (perhaps from other companies that they have purchased). Of course, you also want to make sure they have money (you do not want to put them on COD until they establish credit with you).
Selling the Baby
Selling the business you have grown over the years is very different from selling your products. It is a lot like selling your own baby. You have probably answered customers’ questions about quality, price, lead time, features, certifications, etc., a thousand times. Most likely, these questions do not make you emotional anymore because you have learned how to take a punch and get back up again. Selling a business touches a whole new set of emotions and before you get used to it, the process is over.
You have been through customer audits dozens of times; this will be tougher because you have not been through selling your business before. What makes it tougher and more involved than most transactions is that so many people are involved and all people are difficult (especially when large sums of money are involved).
Remember when you got your first big order, or better yet, when the customer finally paid you for that order? Closing is kind of like that, but with more ups and downs than the elevators in the Empire State Building. Stay strong and you will reach the finish line.
Working Past the Close
Most deals involve some form of deferred compensation as well as a transition agreement for the owners. In sales, it is a cardinal sin to keep working past the close; however, in M&A, it is quite common. All the more reason to get to know the buyer well before closing the deal.
Every deal is different, so things may come up in a deal that you are not prepared for. Most likely, your team has seen it before, or at least a variation of that issue. Be sure to prepare well, assemble a great team, and pay yourself a great commission when the deal is done.
Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures.