Selling your business – Tips for how to sell your business

It makes sense to start the sale process in good time. Read our advice on how to prepare to sell your business.

Selling a business is a time-consuming process and its preparation and implementation may take years. 

When the disposal is first considered and the idea proposed, it is not worth delaying the sale preparations. The earlier the preparations are started, the quicker it will be to get to the completion stage.

1. Preparing to sell your business

Begin with the sale preparations. You should make sure that all parts of the business are healthy at the time of sale, as the condition of your business will affect the sales price and the buyers’ interest. You will make it easier for the buyer if your business is not dependent on the current owner and everything is in order.

Financial statements alone do not reveal all the key aspects of a company’s profitability and profit. For this reason, it is worth going through the balance sheet and taking out anything that is not the company’s core business. Profitability and the company’s earnings capacity will be of interest to your buyers.

Ensure that the company’s contracts, processes, products and financial management are carefully documented and archived. 

It is also advisable to draw up a brochure which provides basic information about the business, its organisation, the market situation, products and the company’s most important customers and suppliers. 

2. How to sell a business?

You can sell your company either through a sale of shares or a sale of business. 

In a sale of shares, the company’s shareholders sell the shares entitling ownership of the company to the buyer. The shareholders get the sales price themselves. Through the transaction, all the rights and responsibilities attached to the ownership of shares, such as debts and liabilities, are transferred to the buyer. 

In a sale of business, the company sells its business to the buyer, either in part or in full, and the buyer pays the acquisition price to the seller company. As part of the transaction, the company’s customer-based and contractual relationships are often transferred to the buyer. However, debts and liabilities are not transferred but remain with the seller. Neither does a business transfer affect the ownership of shares of the seller company.

3. How to find a buyer?

Finding a buyer may take some time. First, it is worth investigating whether the people closely associated with the business or other stakeholders might be willing to buy. Contact your employees, relatives, competitors and any other stakeholders. They will be familiar with your business and its potential.

Draw up a sales advert and publish it through online channels specialising in corporate acquisitions. 

You can also make use of business brokers and organisations in your own region, such as your local entrepreneur organisations and the Centre for Economic Development, Transport and the Environment.

4. Measure the value of your business

In practice, there are two ways to measure the value of SMEs: intrinsic value and net asset value, which is the value of an entity’s assets minus the value of its liabilities.

The intrinsic value of a business is based on how much a new owner can earn from it in the medium term. To calculate the intrinsic value of your business, you need to have a realistic forecast of profits over, for example, the next five years.

The net asset value of the business, which is the value of its assets minus the value of its liabilities, is considered the minimum price for your business. 

The value of your business is not the same as its price at the time of sale. The price is a figure agreed between the seller and the buyer, and it can be higher or lower than the value of the business.

5. Sales negotiations

When you have found interested parties, you should start preliminary sales negotiations. Your objective is to find genuine potential buyers. 

Once negotiations have started, it often makes sense to draw up a letter of intent. You can use it to agree on the selling schedule and confidentiality. The letter of intent should clearly specify the extent to which it is binding. Prepare carefully for the negotiations, and anticipate the different proposals and views the buyer may have.

It is advisable to draw up the final contract of sale only after you have reached an agreement in the negotiations and when both the buyer and the seller can agree on any issues related to the contract and the valuation of the business. 

Business acquisition experts can help you both in selling your business and in drawing up the documents and agreements.