The Exit Strategy
If you’re thinking about or considering selling your online business, whether to move to another venture or for retirement, then spending some time planning an exit strategy well in advance is key to a successful sale. Many business owners who don’t do this preparation, find that when they go to list their business for sale, that it’s not in as good a position as they would’ve liked, and they have a lot of work to do just to get it listed.
By preparing you business well, there are a range of benefits which you may see come sale time including:
- A higher sale price because the business has been tuned for profit over the previous 12 months.
- Easier and quicker sale process because the business information is well prepared so there are fewer buyer questions and due diligence
- A more defined range of buyers because the detailed business information helps deter tyre kickers.
- Less preparation work before going live because you’ve spent 12 months getting this organized.
This article is focussed on sellers so, we’ll outline a detailed roadmap for you to follow to best prepare your business for sale. We chose 12 months because most business valuation methods tend to focus on the previous 12 months of trading and revenue, so this is the key timeframe to focus on. After reading this article, you should be well prepared to work on the key areas of your business to put it to market in 12 months’ time.
Before 12 Months
It’s worth a mention that the preparation of one’s business for sale, can be started a long time before you even think of selling it. Good setting up of business systems and processes as well as a focus on growth and profitability should be the foundational points of focus in your business from day one. So, many of the items discussed below can be implemented from the start of your business and can be incorporated into a sound business plan from the beginning.
12 Months Out
You’ve made the decision that the sale of your business is going to happen. Now it’s time to begin the preparations.
Focus on Growth and Revenue
Right now, its important to ensure that the businesses profits are going to remain steady and even grow over the next 12 months. Buyers love to see a steady or upward profit trend, so the next 12 months of financial track record is going to set the benchmark for the success of the business and the value you will get from the sale of it. Get to know all of the financial elements in your business and ensure that your recording is in place and is correct.
The key way to ensure the revenues are strong is to plan to invest into some growth strategies, which could be via search engine optimization, paid advertising, social media presence, influencer marketing etc.
Task: Write up a plan that puts some time and funds into growth to ensure that the next 12 months return healthy revenues.
It’s important to be monitoring the main performance indicators of your business. From accounting to stock levels and everything in between. These will be specific to what type of business you’re running, what niche your in, what product you sell and so on.
As an example, if you rely on organic search results to bring traffic to your website, then you need to closely monitor Google Analytics, use Ahrefs (or any other similar software) to see what your traffic is trending like and what your keyword and search positions are. This way, you can see if there are any changes that need attention, because these statistics and trends will form an important part of your business information inspected by a potential buyer.
Task: Look at the key performance indicators that are core for your business and set up a way to regularly monitor these over the next 12 months.
Improve Your Brand
Now is the time to have a look at your branding and see that it is cohesive and presents well as a package. Remember, buyers looking at businesses to buy, want to see a brand that looks and feels the same from the website, social media, products, packaging and so on. Is your naming consistent across all mediums? What about your brand colors? By looking into this now, you will have time to make corrections or hire someone to do a brand refresh if you feel that this is an area of weakness for your business.
Task: Create a one page ‘branding board’ which includes your branding colors, names, fonts and any images which represent your brand style. Then use this to assess all your intellectual property to see if it looks and feels like what your branding board represents. If it doesn’t, then you have 12 months to fix it.
Supply Agreements and Surety
This can be an important aspect which potential buyers will be looking for. They want to be buying a business which they can continue to manage without any major issues from the outset. Having supply agreements and contracts in writing with any product or service providers who are critical to your business is a key method of ensuring that the business will continue without interruptions when the new owner takes over. It adds an extra level of certainty and professionalism to your business offering and buyers love that.
If you can’t get supply agreements, then look for other ways to secure your supply chain. An example of this is to investigate other suppliers of your key services and/or products so you can show this to a buyer. Its kind of a backup plan where you can say ‘if the current supply chain falls over then we have this secondary backup option you can use’.
Because these agreements are normally negotiated between you and your supplier as well as possibly requiring legal advice, they can take some time to finalize, so its good to start on these now.
Consider putting in place confidentiality agreements and a non-disclosure agreement with suppliers as these are good business assets any advisor would recommend.
Another important consideration will be key employees or freelancers who work for you. Try to ensure that your team are committed to your organization because having them quit around business sale time is not a good look for prospective buyers.
Task: contact your key service providers or suppliers and begin the discussion about forming a supply agreement with them. Remember; they are likely to be keen on this because it works both ways and helps them to continue providing for your business as well as helping you.
6 Months Out
Technical Search Engine Optimization (SEO)
Unless you’re doing regular search engine optimization, this could be an area of weakness that is easily addressed. Parts of this will already be looking good if you have implemented the 12 month Growth and Revenue task, however it is worth looking into because part of a buyers assessment will focus on stats, figures and values relating to the search optimisation of your website.
One simple way to assess this is to have an SEO Audit completed by a 3rd party. Or you can use a site like GT Metrix yourself for free. Both methods will result in a report which outlines any technical issues with your website. If you are familiar with SEO, then you maybe able to do these fixes yourself or if not, then you will need to have a freelancer or SEO company do them.
Task: Do an SEO audit of your site to look for any easy fixes to improve its performance and results.
When you go to sell a business, not only do the potential buyers want to see detailed information about the processes and systems that it runs on, but there is a handover/training period to consider as well. This handover period is where you will be required to help the new owner for the first few months to get up to speed with how to run the business.
So, the more information you document on how to run the business, the better. It makes the business a more valuable asset to sell and makes your life easier post-sale as you won’t need to spend as much ‘teaching’ time with the new owner.
These documents could include process for ordering products, quality control checks you do, your marketing plan, your business plan etc. Anything that has steps to follow, can be documented. A key takeaway with this stage is to try to improve your systems and processes as you document them and move to automation of these as much as possible as that’s a big draw card for buyers.
Task: Make a list of all of the processes and systems you have in the business currently and start writing up documents which outline the steps each of these have to complete them. Summarise these in a master document which is a list of all the sub-documents and lists the timeframes the new owner should do each one on.
3 Months Out
Where to Sell
Ideally you should begin to look at where you’re going to sell your business. Online businesses sell well online, funnily enough! Flippa.com has a range of services which meet most sellers needs, whether an auction, private sale, business broker assistance etc.
I would recommend having a good look at other listings similar to your business or niche and see what information they provide, what multipliers (method of pricing the business) they use and any other things that you could currently be missing, information wise, to add to your business information.
Task: make contact with a Flippa representative and discuss the best option for you and your business in terms of which way to list it for sale.
At this time, you will have 9 months previous trading within this roadmap to the sale of your business. This information and statistics can now be used to run the figures and get a likely valuation for the businesses value. Task: Have the business valued with Flippa’s free Online Business Valuation Tool to see the likely sales price of the business. From here you need to decide if that sale price is what you will accept and if so, focus on continuing to manage the business well for the next three months up to the listing date.
1 Week Out
Getting it all Together
Over the last few months, you will have been setting up the way you want to list your business for sale. Now its time to get all of your business information together, update it all to the current date and be ready to go live with your listing.
Task: Spend some time updating and double checking all of the financial statements, tax returns, accounting and business information to ensure you have a correct and profession package to offer up to potential buyers.
Day Zero – List Your Business for Sale
After all of the hard work over the last 12 months the day has finally arrived to list your business. Depending on the chosen method of how you wish to sell your business, its time to upload all of the data and send the listing live.
Once the listing is live, you will go through a period of question and answers from various potential buyers, know as due diligence, where they probe to see if this is a business they would like to buy, as well as some negotiation of the purchase price. Use the information and documents we’ve discussed in this article to help you or your business broker answer all the queries thrown at you and you should be in a good position to sell and sell quickly and easily. You may also wish to involve your financial advisor during this period to assist you.
To conclude, by following a clear 12-month framework, you will achieve and better value in a successful business sale, more easily and quickly. The investment of time and preparation discussed will prepare you and the business for this and it’s a well-known fact that prepared businesses sell quicker and for more money. If business owners put in the leg work now, they’ll reap the rewards in a years time.
Want to learn more about selling your business for a profit? Read How to Sell Your Business at a Premium here.