Whether you’ve just decided to sell your business or have been planning it for some time, there are many factors to consider. Here, we look at the selling process, and some critical questions for you and your team. Plus, we explore the benefits of preparation portals for easing the burden of information gathering and secure data management.
Preparing to sell your business
Selling a business is a significant step, and the process can take up to 12 months or more. Timelines will vary depending on numerous factors, including your expectations and goals, business sector, economic conditions, and level of preparation. Of course, the availability of suitable buyers also comes into play.
Once the decision to pursue a sale is made, it’s vital to get prepared as early as possible. Feeling in control at this early stage will put you and your business in a more positive position once the right opportunity surfaces.
Generally, the process can be broken down into four key stages:
- Preparing for sale, where you’re researching potential buyers and gathering the information you need to present the opportunity
- Marketing to potential buyers
- Considering offers
- Getting the final negotiations over the line
Given that the sale process can take many months, juggling the day-to-day of your business while also preparing to sell it can be tough. Having a plan, together with time-saving tools for each of these stages, helps optimise your time and effort and can also identify tasks that can be delegated or outsourced.
What does the deal preparation phase involve?
Starting the preparation phase means asking yourself some key questions - they are amongst the first and most important questions a potential buyer will ask of you:
- Why are you selling?
This will be one of the first questions any buyer asks. How you answer it could affect your appeal in the market. If your reasons include elements like partnership disputes or falling profitability, you’ll certainly need to present them honestly but carefully. - How did you reach your sale price?
Do your research and get a valuation of the company from an objective and external source, such as a business consulting or accountancy firm. This will tell you where your business sits within the market and provide you with the opportunity to correct any issues before selling. - Do you have the documentation needed?
Incomplete records are common among SMEs but can be a deal-breaker. A buyer will insist on seeing meeting minutes, resolutions, important contracts, and much more. To be convincing, you must be able to deliver all information quickly and efficiently.
While the enormity of the task ahead may feel daunting, there are tools and processes to simplify and streamline the work involved. One of the best ways to get organised and stay on top of questions, documents, deadlines, and discussions is to use a preparation portal. It will lay the groundwork for a successful outcome helping to present you and your business in its best light.
What is a preparation portal?
A preparation portal is a virtual data room that securely stores, organises, and shares confidential information. It is used during the preparation phase of a business transaction, and access is restricted to internal teams and advisors.
Missing or incomplete business records are a significant factor in due diligence roadblocks and around 60% of all merger or acquisition deals fail due to poor or incomplete due diligence.
Therefore, spending time ensuring business records are up to date is critical at this early stage. As consulting firm EY points out,
Accurate and detailed recordkeeping that dates to the founding of the business can go a long way toward enhancing a company’s value by reducing the buyer’s perception of risk.
A preparation portal will get you organised early and help ensure records are complete. Its advanced data management security features will also safeguard your most sensitive business documents, including:
- Financial performance – e.g profit and loss, financial statements, extraordinary costs.
- Business strategy – e.g value propositions, marketing, sales and development strategies.
- Assets, capabilities corporate documents – e.g equipment or saleable assets, articles of association, certificates of registration, board and senior management meeting minutes.
Do I need a data room or a preparation portal?
While a preparation portal is a type of virtual data room (VDR), there is one key difference. Virtual data rooms are recognised as the optimum way to manage a potential business sale, acquisition, or financial transaction. Fundamentally, VDRs store, share, and streamline the organization of documents needed by buyers during the extensive due diligence process.
A preparation portal is a VDR that is not yet available to external parties, such as a potential buyer or the buyer’s advisors. When a buyer or third party is invited to access the documents stored in the preparation portal, it automatically transitions to a VDR. While this means access to documentation widens to include external teams, access to confidential documentation remains controlled by the data room administrator.
Therefore, in essence, a preparation portal is a restricted data room that contains all the necessary functions for preliminary work and preparations that a seller is not yet ready for potential buyers to access.
While preparation portals offer the same features and benefits as a VDR, they have the added advantage of providing a safe space for sellers to compile, store, and sort through large volumes of documents without the pressure of a buyer team being present.
Ultimately, time can be spent ensuring every detail is accurate and available for the extensive due diligence process ahead. Coming to this critical phase of the deal process, feeling organised and efficient instils greater confidence in you as a seller, which will be reflected back to your potential buyer.
In summary
Selling your business and achieving your exit strategy goals requires meticulous planning, preparation, and commitment. You and your team must also spend many months preparing to attract and secure the right buyer.
Working with expert advisors, a preparation portal helps you get organised and prepared for the scrutiny ahead. It ensures that trust based on accuracy is the foundation of your discussions around the boardroom table. Ultimately, with no room for error, pre-sale organisation and due diligence are critical to presenting your business in its best light and moving negotiations forward to completion.
Ready to explore the benefits of a preparation portal for your business? Get started here
