Selling your business is not as easy as it might seem – if you want to get a good price for it. Developing a succession plan requires careful planning and thought, and there are a number of steps to take in the process.
First of all, it goes without saying that you must have a good quality business. Assuming all businesses are similar in the eyes of prospective buyers, what will make yours stand out from the crowd? Having a profitable, quality business is the first step in positioning it for sale and wooing potential buyers.
Secondly, you need to identify your preferred type of buyer. Whether that be an internal successor in the form of employees, an institution or another practice, it is important to identify who to sell the business to and who would naturally be the most appropriate owner.
Thirdly, you need to position your business to appeal to this ideal buyer. With financial market uncertainty, regulatory change in the form of FoFA and other factors, it is likely that there will be more sellers than buyers in the market. So you have to get to the front of the queue, by setting out to woo that buyer and make sure they know your business is better than potential competitors’ businesses.
Fourth, don’t put all your eggs in the one basket. You need to create a bit of competition among potential buyers and make sure you woo more than one particular buyer. If you set your sights on one and one only, they could have a change of heart or policy and turn their back on the deal for whatever reason. You don’t know what could happen, so it’s best to create a bit of competition. Of course, you don’t want to burn your bridges by upsetting them in some way, so play it carefully with this step.
Lastly, developing and executing a good succession plan takes time. Don’t think that you can just advertise your business for sale and wait to see what happens. Developing a strategy for sale, identifying prospective buyers, and communicating and engaging with them to a point where they want to buy your business does not happen overnight.
The same principles apply to an internal succession plan. In many cases, the best chance is to develop succession is from within your business and to sell to up and coming principals. So you need to make sure you get your staff involved in the business, communicate with them, and develop the business to a point over a period of time, where a potential internal successor can see that it’s a great business and that it’s up to the mark so they want to buy you out.
