Like many romances, the way you see business in Hollywood is nothing like how it is in reality. The same applies to when you come to sell your first company.
There are definite lessons I learnt when I sold my first business. I wish someone had told me what I’m about to tell you. There is a right way. There is a wrong way, and I am here to tell you the right way.
First up, the sale of a company happens, not when you feel your business venture comes to an end, but from the very first day you start trading.
Here's why: Every contact, every professional you meet, every lawyer is someone who could potentially help you come sales day. Good lawyers are essential in you getting the best sale, and the earlier you forge links with them the better.
That’s the reason why ethics is so important in business, not just so you can go back home and feel good about yourself. It enhances your reputation. It builds trust, and everybody wants to work with someone they can trust. Being bad might work if you are in the gangster industry, but if you are in corporate finance it's definitely not so seductive, although some might say there’s not much difference between the two.
So let’s think: Preparation might be key when developing your business, but it's also key when you are selling it. I'd even go as far to say it should be part of your business plan in the first place, even when you are caught in the honeymoon period of being your own boss, you should be thinking: What can I do now that will help me if I ever have to sell?
On the sales pitch, you don't want to go in hard line or be a tough negotiator; you’re looking for a win-win situation for everyone involved. Offer your business on the basis that everyone will earn something out of it, that will help you sell much more easily and much more quickly. Forget the Hollywood stereotype of Mr Nasty cracking the whip, maybe it will get you respect, but it won't win you admiration from your buyers.
If you love your company, if you are passionate about it, which you should be, if you are ever going to be a success, beware of who you sell to. The company that takes you on has to be good enough to support the baby you have created. Check it has good credit, check it is not going to make you liable for anything once they are running it. Don't sign anything that makes you responsible if it goes bust, after you have changed hands.
The company my first sale went to, although ambitious, went bust, taking my venture with it. On paper the company that bought us was the best bet, but it took on five companies at the same time and it was too much to handle, the weight brought down, not just the ship, but the entire fleet with it. It was like kissing my first love goodbye to another man, and watching her starve.
So the last things you should consider are both one obvious and one not so evident crucial tips. The less obvious is to make sure you qualify for something called taper relief before you sell a company. Something most people find out about when it is too late, but just doing this one thing alone will save you a whopping 35% in tax. The last point sounds too evident to mention, but you'd be surprised just how many fall victim.
Don't sell a business unless you really want to. Don’t sell it because you have had a run of bad luck, or your partner keeps moaning, or you want money for a holiday. I agree they might seem like amazing reasons at the time, but these are temporary factors that will go away. Only sell if you are 100% certain it is a savvy business move, free of sentiment. Once you are down the road of selling, it is almost impossible to turn back. Your lawyers are involved, your employees are involved, your time is involved and you'll find you are spending money you will never get back. Good luck.
William Berry is a serial entrepreneur and in 2006 was named a Young Gun by Growing Business. He is the founder-director of
. William is also CEO of the new video start up
, based in California.