Thinking About Selling Your Business Doesn’t Mean You’ve Decided to Sell

For an owner-manager, the idea of selling rarely begins with a firm decision. More often, it starts with a simple thought: “I’m beginning to think about selling.”

That thought can mean very different things: wanting to step back gradually, wondering what the business is worth, a change in family or personal financial circumstances, hesitation about taking on another phase of growth, or simply a wish to understand what the options might be a few years from now.

At that stage, nothing has been decided. Before considering putting the business on the market, an owner can take time to understand the position they are in and explore several possible courses of action.

The discussion may eventually lead to a sale. It may equally lead to a gradual handover, a minority investment, a reorganisation, a decision to wait or a decision to keep the business.

Considering a sale is not the same as starting a sale process

Talking about selling can make it sound as though a process is already under way. Yet seeking a valuation, making financial information easier to understand or looking at how much a company depends on its owner does not mean that a search for buyers has to begin.

In practice, these decisions tend to develop in stages. An owner may want to understand the economic value of the business without wishing to sell it. They may want to find out what would make it easier to hand over in a few years, identify its dependencies, put important information in order or strengthen the management team.

All of that can be done without exposing the business to the market. It gives the owner a better-informed basis for thinking about what comes next.

The position changes when potential buyers are approached, a company presentation is circulated, sensitive information is shared or a price is discussed. Other parties begin to form their own view of the business, and the flow of information becomes harder to control.

Preparing usually leaves an owner more room to manoeuvre than taking the business to market. Once information has been shared, it is harder to control what happens next.

Options worth exploring before a sale

Several possible courses of action may deserve consideration before starting a sale process.

Obtain a valuation : An indication of what the business may be worth can help an owner understand its place in their wider financial position and inform future choices.

Prepare for a possible handover : Clarifying responsibilities and documenting financial information, particularly where key functions still depend on the owner, can make a future transfer of ownership easier if that is eventually the chosen route.

Examine different scenarios : The owner can consider the implications of a future sale, bringing in a minority investor or transferring ownership gradually, without immediately approaching buyers. Any preliminary sounding of buyer interest, however, needs a clearly defined framework and strict control of confidentiality.

Wait : A careful review may show that selling would be premature. There may be another phase of growth to complete, the management team may still need to develop, or the owner may simply want to continue running the business.

Bring in a shareholder without making a full exit : Taking on a partner, selling a minority stake or changing the ownership structure may meet some of the owner’s objectives without selling the entire business.

Plan for succession : Depending on the circumstances, continuity might be achieved within the family, through the existing management team or with a new principal shareholder.

The right course depends on the business and what its owner wants to achieve. There is no need to settle on one option when the question first arises.

Preparation helps an owner make a better decision

Long before any discussion with a buyer, a few practical questions become worth asking. How much of the relationship with important customers still rests with the owner? Who really ensures that day-to-day operations continue? Are recent results easy to explain? Could the business operate differently if the owner’s role changed?

A company may be profitable, have loyal customers and run well, yet remain closely tied to its owner or difficult for someone unfamiliar with its history to understand. Identifying these issues early helps establish what might matter in a future handover, without trying to change the business artificially.

That knowledge creates time to act. A dependence identified several years ahead can be accepted, planned around or gradually reduced. A contract may be clarified, a team given more autonomy, or financial reporting made more reliable. Once a sale process is under way, there is generally less scope to address such matters.

The review may also lead to a decision not to sell. Choosing to wait two years for a clear reason differs from putting off an uncomfortable question indefinitely. Likewise, deciding to keep the business after examining the alternatives is different from never having considered them.

Three questions before approaching potential buyers

• What am I trying to protect? My family, my energy, my financial position, my time?
• What do I want to make possible in two or three years? A gradual handover, another phase of growth, a new shareholder, greater freedom?
• What would help me make a considered decision, even if I do not sell? Clearer financial information, a more independent management team, an understanding of the business’s value, a wider choice of options?

The answers may change. That is one reason to ask these questions before a decision becomes urgent.

A decision need not be immediate

An initial thought about selling does not oblige an owner to choose a course of action. It provides an opportunity to understand what could be done, on what terms and over what timescale.

If a sale is eventually chosen, this early work will generally help the owner approach it with greater perspective and a clearer understanding of the matters that need attention.

At ACS Consulting, we also advise business owners at this earlier stage, with a methodical and confidential approach, without assuming that a sale will follow.