The first and most important steps to take before selling your business are A) analyzing your own goals for wanting to complete a transaction; and B) deciding on the right type of deal to aim for. These steps are crucial because they will define how you prepare for the transaction and how to best structure your company for a successful sale.
Generally, business owners in the middle market have one of two entirely different reasons for wanting to sell. The first is the more obvious in a country seeing an aging baby-boomer population, and that is retirement. The second is that the ownership group has reached constraints in the company’s growth and needs a partner to help remove those constraints in order to quickly grow the company. These limitations can include: the inability to raise capital, a lack of skills and/or infrastructure, or an unwillingness to take additional risk.
Since many middle market companies grow from the heart, soul, and wallet of an individual entrepreneur, there is often a transition that takes place at some point in the growth period of a successful middle market company to bridge the company from individual ownership to a more institutional company.
Depending on whether your goal is one of these reasons or a combination of the two (partners of unequal ages, family transitions, etc.), you’ll want to carefully consider what you are trying to accomplish with a transaction before diving into the M&A process.
Michael Schwerdtfeger’s eBook “The Inner Workings of a Deal: Tips for a Successful Transaction” is now available for download on his website. Get your free copy here: http://mbsmergers.com/downloads/Share: