27/09/2020

Selling company: how it works and who to contact

You decided to sell the company as it has already happened to many Italians in these times of crisis, the problem is that you do not know how to do it. Selling the business quickly is a real desire but you need to know who to turn to and how it works.

In this article, we at e-risparmio.it want to help you understand how to sell a business in the best way and who you could turn to.

In recent years we have reached a record number of companies sold, mergers and acquisitions and few entrepreneurs are really satisfied with the performance of their company. The sale of commercial activities also takes place through bankruptcy auctions.

Everything you need to know to sell your company

Who to turn to to to sell a business?

If you are really sure about your decision to sell the business, then you need to find a contact person you can turn to to to sell the business in the best possible way.

You may not know that there are businesses that specialize in buying and selling businesses. They are usually financial advisors and investment banks.

Unfortunately, many companies, making mistakes, look for alternative solutions possibly free of charge to sell their business, risking making even serious mistakes. You can’t sell a company on a waste of time, taking it lightly.

To sell a business in the best way you need a professional, someone specialized in this business who knows how to maximize the transfer value, studies the market and knows the direct competitors, knows tricks, secrets, clausules, evaluations, etc. … in short, someone to trust and who knows how to do his job, no one improvised.

One must not underestimate the time that this operation requires. In fact, the company in question must absolutely not distract attention from its activity, which must continue in order not to lower the enterprise value. Delegating is really fundamental in this situation.

Selling a small company: how it works

You think selling a company is easy? Extraordinary operations in SMEs are far from simple.

There are many people involved in the acquisition of a company:

  • financial advisor
  • internal legal
  • outside counsel
  • accountant
  • labour consultant
  • lenders
  • environmental consultants
  • real estate consultants
  • HR consultants etc

Often, the smaller the company, the more complicated the operations turn out to be because in small companies the link between the entrepreneur’s personal position and the company is very difficult to dissolve.

Very often in small businesses there can be the following dynamics:

  • relatives who work in the Company without any title
  • loans of money received from members
  • overcompensation
  • All these aspects do not escape the potential buyer’s advisors, and the consequences cannot be ignored.

Selling business: because sometimes it is worth it

Selling your company emotionally is very hard for an entrepreneur. It is often a question of giving up a part of yourself, a creature that you have created and from which it is difficult to separate yourself. But don’t panic because selling the company can be a winning choice.

It can be an opportunity to change your life, to enjoy time and live more peacefully and peacefully.

The newspaper ilsole24ore.com told the story of Dean Hoyle, who is the co-founder of Card Factory.

This entrepreneur sold his company in 2010 for £400 million. Currently the company Card Factory is listed on the stock exchange and is worth over a billion dollars. Dean Hoyle answered the question in an interview if he ever regretted selling a company that has significantly increased its value: “What could I do with £1 billion that I can’t already do with £400 million? Do you think it’s not wise to sell your company, especially if it’s in the black?

An opportunity to change your life

Selling your business can be an opportunity to change your life, raise its quality and live more relaxed.

Dean Hoyle, has decided to dedicate himself to his family and the Huddersfield Town football team, which he owns. His choice was to raise the quality of his life. By selling his company, he found a balance. Hoyle remained non-executive chairman of his former company and then became non-executive director to further reduce the amount of work.

It is very difficult for an entrepreneur to change professionally, in fact very often those who sell their business in some way continue to be part of it. Some entrepreneurs remain under contractual obligation for a limited period. Others, on the other hand, do their best not to leave the company, especially when it is a family business.

In 2012, the private bank Coutts, carried out research into UK entrepreneurs who had sold their business. The report found that only a quarter of them had retired:

  • some of them have committed themselves to humanitarian initiatives
  • more than half of the respondents have created a new company
  • 74% continued to offer advice to other companies
  • 65% invested in another business activity

Do you want to know how Dean Hoyle’s story ended? After living his family to the full and above all over the teenage years of his children, he decided to return to work full-time as president of The Chain. Hoyle really was a strategist.

How to sell a business

First of all, before dealing with the divestiture of commercial activities, undue mixing and a consequent loss of credibility must be avoided. Then it is necessary to redirect an informal memorandum, i.e. a document providing a presentation of the company.

Overall, selling a company is a very delicate and risky process.

Below I would like to list some mistakes not to make in buying and selling a company, which could put this delicate transaction at risk:

  1. Make the buyer believe that the success of the company depends on the first owner

Very important is to make the buyer understand that the company can work well even without you because you have created a system, a work process that also works thanks to your employees. People who buy a company want to be able to manage it in the best possible way and feel independent from the old owner.

  1. Show poor capacity for company growth

No entrepreneur wants to buy a business without opportunities for development and growth. So find a way to prove that your business is worth buying.

  1. Presence of employees who are unsuitable or hostile to change

Employees need to be prepared for change and reassured. They should not be afraid, they should be encouraged and motivated.

Employees are in fact the company, so it is very important to have a motivated team that is prepared to face change with determination and courage.

  1. Giving up the grip by generating few profits

This is the best way to devalue the company and lower the sales price.

Instead you have to do just the opposite, so lower costs, increase revenue and prices if possible, reorganize and optimize the internal structure.

This way you will show potential buyers the value of your company.

  1. An “old” and inefficient management system

Whatever software you use, the important thing is that it is effective and that there is a very clear, precise and well organized accounting system. This way you can immediately understand if something is not working as it should and resolve it promptly.

These small and simple tips are fundamental for the sale of a company and consequently for a good business evaluation.

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