Preparing a sale process

Every sale process is company-specific and therefore unique. Consequently, there is no standard formula for selling a business. However, the sale process can be easily divided into a planning phase and an execution phase.

The planning phase is very time-consuming and is designed to prepare the company optimally for the upcoming sale process. Thorough and detailed planning increases the changes of receiving positive feedback from potential buyers. The execution phase usually consists of an approach phase, due diligence and a negotiation and closing phase. There are different things to consider at each stage of the sale process.

Price expectations when selling your business

It is only natural to have expectations or hopes regarding the price that will be paid for the business, but many owners believe their business is worth more than it really is.

Common reasons for this misperception include:

  • Failing to objectively assess the strengths and weaknesses of the business
  • Not recognizing that the business is dependent on personal involvement
  • Hearsay within the industry about prices and valuation multiples paid for similar businesses
  • Basing price expectations on trading multiples of large public companies
  • Basing price expectations on investments made in the past

It is important to recognize that the price paid is only one piece of a successful sale process. The terms of the deal (for example how, when and under what conditions the purchase price is paid) as well as intangible aspects, such as a non-competition agreement, are equally important to maximize the transaction value.

How long does it take to reach a deal?

The time and effort needed to achieve a successful sale are often underestimated. While external advisors will do a lot of the “heavy lifting”, the input and involvement of the owner and the management team are vital to make sure the business is ready for sale and to review offers and agreements. The time requirements for each specific phase of the sale process can be depicted as follows:

Reasons for selling your business

The reasons for selling the business are of great interest to the buyer. In fact, the buyer usually wants to know why they should invest in a business that the owner wants to sell. For example, a sale due to succession is an accepted reason. While it is important to be honest, the owner should recognize that their answers will influence their negotiating position and possibly the price or the terms of the deal. A sale due to retirement or for health reasons could concern the buyer as it raises questions about the owner’s willingness or ability to help transition the business. Similarly, a sale due to loss of interest in the business could lead the buyer to wonder what the owner intends to do after the sale, and a sale due to financial distress could be a sign that the business has been mismanaged. Therefore it is very important to elaborate on the reasons for a sale and to communicate them clearly to the buyer. These are common reasons for selling a business from the seller’s perspective:


  • Succession arrangement
  • Too small in a consolidating market
  • Too small to compete with the investment pressure
  • Concentration on key competencies
  • Outsourcing of functions


  • Attractive purchase price
  • Critical needs
  • Restructuring

Stay or go

Most buyers want the former owner to remain available for a certain period following the transaction to help facilitate the transition, anywhere from three months to five years. Their role could range from that of a part-time consultant to a full-time employee. The length and type of availability depends greatly on the business, the former business owner’s function as well as the buyer’s preferences. Simply put, it is important to establish a strong management team which is independent of the owner well before the sale.

How to maintain confidentiality

Confidentiality can usually be ensured until the closing of the transaction. However, the more people involved in the transaction process, the harder it is to ensure confidentiality. There are a few things that can be done to reduce the chances of a breach of confidentiality, including:

  • Having a code name for the sale process
  • Having buyers sign a non-disclosure agreement
  • Clearly establishing communication protocols between the involved parties
  • Preventing numerous unusual requests for information from staff
  • Running the business as if you were not going to sell it

Mistakes to avoid when selling your business

  • Inadequate personal reflection on the sale of the business
  • Inadequate planning for the sale
  • Underestimating the time and effort involved in the sale process
  • Unrealistic price expectations
  • Focusing on getting the highest price for their business and underestimating the importance of the terms of the deal
  • Allowing or tolerating conflicts of interests of external advisors and staff involved in the sale process

Expert advice to help you prepare to sell your business

The following three key advisors should be retained to advise on the sale:

  • The M&A advisor or investment banker manages the sale process by helping to prepare the business for sale, providing an objective assessment of its value, finding and contacting buyers, preparing information for buyers, facilitating the due diligence process and negotiating the terms of the deal

  • The lawyer takes care of the legal issues during the sale process. They are mainly involved once a letter of intent has been received. Their main responsibility is to negotiate the purchase and sale agreement with the buyer as well as related agreements, such as the management contract and the non-competition agreement. The lawyer also handles the closing of the transaction and related documentation

  • The tax advisor should be involved in helping to prepare the business for sale, structuring the deal and dealing with issues in connection with the closing of the transaction

In most situations, the management team and key employees must also be involved. In such cases, it is important to carefully assess who needs to be involved and how this person should act towards staff who are not involved in the sale process. Moreover, these people need to be given the right incentives as possibly not everyone will view the sale in a positive light.

Other advisors, such as accountants, industry experts or business consultants, can be helpful in special situations during the sale process. Their role, responsibility and incentives should be clearly defined in an engagement letter.

Empowering the ambitious

The importance of timing the sale of your busines