Thinking of selling your business in 3 years? You’re already behind

You might think that three years is plenty of time to prepare your business for sale.

But in our experience (and the Melo team has bags of it), if you’re only starting to plan now, you may already be behind the curve.

We work with business owners every day and we know that the best exits are won years in advance. The sooner you start planning, the better.

Waiting until “the time is right” is the single biggest mistake most sellers make – preparation is what drives value, not timing.

So, if you’re thinking of selling your business – whether in three years or more – here’s why getting sale-ready now could be a super smart move.

You can’t fake readiness in due diligence

Data is a critical asset when selling a business.

Not only can it demonstrate the value and performance of your firm, but it also allows both you and potential buyers to make informed decisions about a deal.

What’s more, financial planning firms are under increasing scrutiny by the Financial Conduct Authority (FCA) to show how they’re meeting the Consumer Duty.

So, any interested parties will certainly want to see comprehensive data records that demonstrate compliance practices, as this is essential for due diligence and regulatory approval of the sale.

If you’re slow to respond to data requests, potential buyers may assume the worst, which could slow your sale or halt it altogether.

That’s why it’s crucial to allow plenty of time to get all your data ducks in a row before going to market.

Read more: Thinking of selling your business? 10 green flags potential buyers want to see

The best buyers won’t be rushed

Acquiring a company is a high-stakes process that requires:

• Thorough due diligence
• A strategic fit and long-term value
• Regulatory and legal compliance
• Integration planning to ensure a smooth transition
• Careful negotiations, which may be lengthy and complex.

It takes time to fit all these pieces of the jigsaw together. That’s why strategic buyers move slowly and steadily.

So, if you feel rushed to lock in a sale, this could limit your options and your profit, which could reduce the funds available for whatever you have planned next.

Read more: Why do you want to exit your business and what will you do later on?

It takes time to build operational independence

If your firm can’t run without you, it could be worth a lot less than you think to a buyer. Buyers don’t want to buy dependency.

That means you may need to adapt your business model so that your team, systems and processes can function without you.

In other words, you need to make yourself redundant.

This might involve:

• Developing or recruiting staff to build a strong management team
• Documenting procedures that only you understand or manage
• Identifying successors for key roles, including yours
• Stepping back gradually and testing your absence
• Training staff to take on your responsibilities
• Fostering a culture of accountability.

Depending on your level of involvement and the current structure of the business, this could potentially take years to achieve.

Prepared sellers attract more offers

Businesses with a proven record of steady growth and operational excellence and that can run independently, are the most attractive to buyers.

And more competition is likely to result in multiple offers, which could bump up the final sale price. It’s not rocket science.

But building a business to this standard won’t happen overnight.

Preparing for sale years in advance gives you the chance to fix any issues and make sure your firm is in top shape before any potential buyers even get a look at the books.

Desperation kills deals

Our final words of wisdom…

The most successful exits happen when you don’t need to sell.

If you sell in desperation (a “fire sale”), this is likely to force you into accepting a deal that is significantly below market value and has less favourable terms, such as long earn-out periods.

You’ll also miss out on the opportunity to boost the value of your business. Speaking of which…

The Melo team will help you achieve the sale you want

If you’d like to find out more about how the Melo team can help you prepare for a flawless exit and achieve a sale price you’re happy with, we’d love to hear from you.

You might also be interested in our Business Effectiveness Review, which will give you crystal clear insight into what’s working well and what could do with a bit of work as you gear up to sell.

Drop us an email at hello@melo.co.uk or call us on 0113 4656 111.