Introduction
Selling a business is as simple as finding a buyer and signing on the dotted line. Unfortunately for business owners, those two things aren’t really all that simple to do, let alone to do right! To achieve the best possible outcome, it’s essential to understand the steps involved and the timeline they typically follow. A well-informed approach not only helps reduce stress but also boosts your chances of a successful sale.
The process of selling a business can take 12 to 18 months on average, or sometimes longer, and involves various stages – from preparing financials and valuing the company to marketing, negotiating, and closing the deal. Each stage has its own unique challenges, making thorough planning and patience essential.
In this article, we’ll walk you through a complete, step-by-step timeline for selling a business. By understanding the key stages, you’ll be better equipped to navigate the process and achieve the results you’re aiming for.
Stage 1: Initial Planning and Goal Setting (3-6 Months)
The first stage of selling a business is about setting clear personal and business goals. These will guide the entire process, laying the groundwork for a sale that aligns with both your vision and practical needs. Some business owners spend years considering this, but you should allow at least three months to carefully consider your options and take some professional advice.
Clarify Your Why: Defining Your Reasons and Goals
Sometimes business owners have a really clear and compelling reason to exit their business, other times it’s just a feeling that now is the right time. Either way, you need to take time to assess and be really clear on what you hope an exit will achieve. Each scenario will shape your approach and help you draw parameters that will guide decisions, helping ensure that you’re satisfied with the sale long after the deal is closed. Some questions to consider include:
- What do I want to do next?
- What financial outcome do I need to enable this?
- How long and in what capacity am I prepared to stay post-sale?
It’s well worth seeking guidance from experienced professionals at this stage, M&A advisors such as Entrepreneurs Hub and wealth managers can be invaluable in making sure your thinking is guided by market knowledge and expertise.
Creating a Roadmap
Once you’ve defined your goals and consulted with professionals, it’s time to build a roadmap with key steps, timelines, and roles of the key players who will be involved in the sale process. This keeps you organised and focused, laying the foundation for a smoother, more successful sale.
Stage 2: Assembling the Sale Team (1-2 Months)
A skilled team is essential to navigate the complexities of selling a business smoothly and efficiently. Some of these areas may already be covered by advisors you use in the day-to-day operation of your business but be careful – M&A is a specialist discipline and our experience with incumbent legal and financial advisors is varied, from those who are excellent, to those who threaten the very success of the deal.
- M&A Advisors: Guide the overall sale strategy, identify buyers, and handle negotiations – they should be the right hand of the business owner helping them to achieve their goals.
- Accountants: Prepare forecasts, management accounts and essential to the preparation of financial documentation for due diligence.
- Lawyers: Oversee structuring and review of Heads of Terms and final Share Purchase Agreement, ensuring the deal is appropriate for you.
- Tax Advisors and Wealth Managers: Essential to helping you plan the deal and manage the proceeds of the deal to minimise tax liabilities and maximising your outcome from the sale.
Each advisor plays a vital role in securing a successful sale, allowing you to focus on continuing to drive the business and planning your next steps. What is vitally important for each advisor is that you trust them – it’s a long and emotional process, if you don’t trust that your team are advising you in your best interests, you are in for a bumpy ride.
Stage 3: Business Valuation and Preparation (2-3 Months)
Before, what we would call ‘going to market’ (identifying and engaging potential buyers) it’s vital to get a guide to your business’s likely market value and prepare for the sale process.
Preparation Steps
To make sure your business is noticed by the right acquirers you need to prepare documentation that emphasises the opportunity. At Entrepreneurs Hub we work with our clients to prepare financial forecasts and plans that emphasise growth, an anonymised ‘teaser’ to encourage potential acquirers to sign a Non-Disclosure Agreement that protects confidentiality, and an Information Memorandum that presents the key opportunities to those interested buyers.
On top of this we work to start populating a secure data room for due diligence and work with the business owners on technique for meeting buyers and handling negotiations.
Stage 4: Identifying and Engaging Potential Buyers (3-4 Months)
There are, broadly speaking, two approaches to finding buyers. A passive one where you effectively advertise the business for sale or approach a limited pool of ‘usual suspects’, and a proactive one involving intensive research and approach. The latter is the approach we advocate in nearly all situations.
Marketing Confidentially
Confidentiality is crucial to avoid exposing you and your business to risk and to protect sensitive information. Your M&A advisor should have a robust plan for discreetly marketing your business, sharing only essential details with vetted prospects. Our article Ten Tips For Maintaining Confidentiality provides a more detailed breakdown of the suggested steps.
Qualifying Buyers
It’s essential to qualify buyers based on their financial capability, industry experience, and compatibility with your goals for the business. This ensures that you progress with serious and suitable buyers only, setting the stage for a smoother negotiation process.
Stage 5: Negotiations and Due Diligence (4-6 Months)
Negotiations
Once offers start to come in, negotiations focus on ensuring that price, terms, and any additional conditions are as optimal as possible. This stage requires patience and professionalism, as both parties work to reach an agreement that aligns with their goals. Thoughtful negotiation helps set the foundation for a successful transition and future relationship.
Preparing for Due Diligence
Due diligence is the buyer’s opportunity to review your business in detail… put simply they are asking ‘am I buying what I think I am buying?’ This can vary depending on the buyer’s expectations but usually covers financials, operational processes, legal records, and more.
To streamline this process, your advisors should help you organise all necessary documents in advance, which should be placed in a secure data room. Being prepared well in advance will pay dividends at the end of the process avoiding delays and building buyer confidence.
Stage 6: Structuring the Deal and Finalising Terms (1-2 Months)
In this stage, you and the buyer draw up the Share Purchase Agreement (SPA), the legal documentation that defines the deal. There is still a degree of negotiation to be done, but it’s largely contained within the parameters of already accepted Heads Of Terms.
Deal Structure
The structure of the deal covers all manner of things:
- How much of the offer is to be paid on day one, and whether the remaining amount will be paid on a deferred or earnout basis?
- What role, if any, will you play post-sale and for how long?
- What warranties or indemnities are to be offered?
Your legal advisors play a critical role here – they’ll review the final agreements, usually drafted by the acquirer, making sure the deal is legally sound and aligns with your financial goals. It’s crucial they are commercially experienced so that they can balance the need to protect your interests with the need to get the deal done.
Stage 7: Closing the Deal (1 Month)
The closing phase is the final step in the sale process, where you’ll sign the final paperwork and transfer assets to the buyer. This includes key steps such as updating ownership records, transferring licenses and permits, and notifying employees, customers, and other stakeholders. Your advisors should help you prepare a strategy and messaging for employees, suppliers and the wider market. Whatever you do, you will need to work closely with the acquirer to ensure that the process is smooth.
Closing a business sale can be an emotional experience, especially if it’s your life’s work. Stay focused on the positive outcomes and trust that you’ve made the right decision. It’s natural to feel a mix of excitement and uncertainty but remember that this is the culmination of a well-planned process. Stay confident in the success of your sale and the next chapter ahead.
Stage 8: Post-Sale Transition (0-12 Months, or more)
It is quite usual for there to be a post-sale transition period, although the length of it will be determined by your circumstances, reason for sale and subsequent negotiations. Most business owners find that a phased exit is more desirable, giving new owners and existing staff/suppliers time to acclimatise to the transition while supporting the business in getting its new chapter off to a good start.
A smooth transition helps maintain business continuity, protect staff morale, and keep customer relationships intact. If you’re involved in the transition, it’s important to set clear boundaries regarding your level of involvement to avoid overstepping, while still providing necessary support.
A well-structured handover will help solidify the buyer’s success and leave a positive legacy for your business.
Conclusion: Patience and Persistence Pay Off
Selling a business is a journey that unfolds over time, requiring careful planning, expertise, and attention to detail. From setting goals and valuing your business to finalising the deal and transitioning ownership, each stage plays a crucial role in ensuring a smooth and successful sale.
It’s essential to work closely with experienced advisors who can guide you through each step, helping you make informed decisions and stay on track. With their support, you’ll navigate the complexities of the process with confidence.
If you’re ready to explore your exit strategy. Entrepreneurs Hub offer a no-obligation consultation. If this sounds useful get in touch with us today to start planning for a smooth transition into your next chapter.
