Four steps to get buyers interested in your company
How to decide whether to sell, research valuations, start prepping the company and get in front of buyers.
"You to hire need an advisor to find you buyers"
"You have to know the buyer already before you can sell to them"
"You have to contact the CEO directly"
"Have you done a teaser deck?"
Business owners struggle with these myths, and many more, about finding buyers for their companies.
Sure β there's a lot of work to get a buyer keen enough to submit an offer. But it's not as complex or confusing as people make out
Like many things in M&A, it gets over-complicated and made worse with jargon and dogma.
All you need is some pre-planning, a good process and some good advice.
Here, we break down the four stages to go from thinking about a sale, to getting in front of buyers. We break down what projects you need to run at each stage.
Here's a spoiler of how it unfolds below:
You do some initial research to see if you're ready to sell and at what rough valuation. Then you start prepping the company for a sale, alongside writing up your exit story and a process to find and shortlist good potential buyers. You then start building some relationships and making contact with potential buyers.
When the responses to your outreach come in, you then have a set of potentially interested buyers to work on.
If you're interested in how to nurture these leads towards a formal offer in a Letter of Intent, check out From Interested to LOI: How to get a buyer to submit a bid.
Contents
We've broken this down into four 'stages'.
These are not as linear and discrete as they appear below. You might do some in parallel, and they will certainly overlap. But this should give you an idea of the main steps in the process and where you need to spend your time.
This is quite a long piece, so here's a table of contents so you can jump to the section that interests you the most:
π Check if you're ready to sell
π Understand your valuation range
π Research deal structures
π Discuss with other owners
Step 2: Prep the company for sale
π Make a list of prep projects
π Scope and staff these projects
π Hire an M&A Advisor
Step 3: Define your exit plan
π Fix a timeline to start speaking to buyers
π Craft your exit story
Step 4: Find and pitch potential buyers
π Make a list of potential buyers
π Build relationships with potentials
π Prepare your pitch
π Start pitching buyers
Step 1: Research
First up, some research. And soul-searching, planning and chatting to your business partner and loved ones.
You are figuring out if you are ready to sell, getting an idea of valuation and making sure you're on the same page as any other owners.
By the end, you should have a decision on whether to sell, the timeline, target valuation and plan of action to get it done.
π Check if you're ready to sell
This is a really difficult, multi-faceted question.
Should I sell this year, or wait? Do I take my chips off the table now, or keep running the business and maybe sell later? What's best for me, my family and the business?
You need to consider a wide range of factors:
- Your personal motivation to keep working on the business, and balancing that with other goals like spending time with family or other projects.
- Your need for financial security.
- Your confidence in the company's performance and the health of the wider industry.
- Your chance of finding potential buyers now vs the future.
We've dived deep into that in here: The Time is Right: When to sell your company. It gives you a framework for evaluating when you should sell, including these personal, company and industry factors.
π Understand your valuation range
A big factor in whether you want to sell is the likely price.
That's hard to know until you're actually getting real-world offers from buyers, but there's some research you can do to give you at least a ballpark or range.
We've written a range of resources on this. Here are some of the best:
- Start here, a primer on valuation and how multiples are used by buyers to calculate a price: What are valuation 'multiples'?
- Actual benchmarks for valuation multiples to help you calculate a range for your business: What multiple should I expect when selling my business?
- If you want to move beyond the theory and get a more concrete idea of what your business is worth, this article gives you four ways to do that: How to get a real-world valuation of your business.
- The Valuation Scorecard is an interactive tool to score your business against factors that affect a buyer's pricing analysis to give you a ballpark valuation: Valuation Scorecard.
- Finally, a deep dive into the factors that drive higher valuation multiples, and actions to increase yours: How to get a higher exit valuation.
π Research deal structures
There are many ways to sell your business. It's a myth that the only way to 'exit' your business is a full, 100% sale.
There are actually a range of options β all of which give you a payout today in return for some or all of your equity in the business.
You should explore the options for how to structure a deal and debate the pros and cons against your reasons for selling.
Read more in the deep dive here: Exploring five M&A deal structures.
π Discuss with other owners
Lastly, this isn't a solo decision.
It's surprisingly common for co-founders of businesses to be completely and hopelessly misaligned during a sale. It's one of the top 5 reasons that deals die.
Maybe one of them doesn't actually want to sell, or they have very different ideas of what price the business should sell for. That causes friction during negotiations, perhaps spooking the buyer or just leading things to fall apart.
So you need to make sure that you're aligned with your co-founders and any other shareholders.
Read more here: Get aligned with your co-founder before you sell.
You've agreed whether to sell and in what structures, defined a target valuation range and got other owners on board. Now the work begins!
Step 2: Prep the company for sale
Now you've decided to sell, you need to start getting yourself organised...
You need to show off the business in the best possible light to sellers.
With a little work you can get the company's finances in shape, iron out any accounting kinks, improve the cashflow, organise the main legal documents, document key processes and so forth.
Getting these sorted will help you massively through the sale process. Do them right, and you should attract more buyers, maximise your valuation, reduce risks of the deal stalling in due diligence and speed up the sale process.
The amount of time you spend here can vary massively. Some businesses need a lot of prep work to get in 'good shape' to sell, so you should ideally start this work 12 months before you start serious negotiations with buyers. Others just need a month or two of tidying up.
That depends on how simple or complex the business is, how well-organised it is and whether there are any major issues that need work.
π Make a list of prep projects
We've set out a menu of 23 projects you could consider to help get yourself optimised for a sale process. Some will apply to your business, others might not.
Check them out here: 23 Projects to Prep Your Business for Sale.
All of these projects should benefit the business anyway, whether or not you end up selling.
π Scope and staff these projects
You can then start working through these projects.
This might look like an overwhelming amount of work, especially as a busy CEO already working at max capacity with ambitious growth targets.
Remember that the performance of the business is key β there's no point having all the housekeeping done if sales start dropping! You need to keep spending over 90% of your energy on growth, as if you weren't even considering a sale.
So how can you make this happen, whilst still focusing on growing the business?
First, rank the projects based on their value to the sale process and which have the longest lead time and need to be started first.
Then work on just one of these at a time β not 10 in parallel.
You scope out the projects, find the right people to work on them (either your existing team or external advisors) and manage them to completion.
There's more tactics on this, including how to get your team involved, in 23 Projects to Prep Your Business for Sale.
π Hire an M&A Advisor
At this stage, you should consider whether to hire an M&A Advisor or broker to help you navigate the sale process.
They provide expert guidance on valuation, finding buyers, negotiation, due diligence, deal structuring and manage the process and comms with the other parties.
The best are deeply connected in your industry, and can quickly help you find potential buyers based on their contact book and reputation. That can be a massive help in finding good buyers quickly.
They are not essential, but a good advisor is especially useful in complex deals, difficult regulatory environments, businesses with specific issues or risks or ones where it's difficult to find a buyer.
You've defined the prep work that the company needs, and made a start. You also have appointed any advisors.
Step 3: Define your exit plan
The prep phase is in motion, and you are busy getting the company organised to start a sale process. You might have an M&A Advisor starting to work with you too. Things are taking shape!
Now you can start thinking about the specifics of how you plan to sell the company.
π Fix a timeline to start speaking to buyers
When will we start speaking to buyers?
Fixing this date is important, as it helps you to balance your time running the business with managing the work explained in this article.
We do this after the planning phase has started, as this can be the major guide of the timeline.
Remember that there's a lot to do here β prepping the business, looking for buyers, writing pitch documents... so you need to be mindful of the load on you and your team. The most important project of all is to keep growing the business, so bear this in mind when setting an ambitious timeline.
There might be an optimum time to start these conversations β perhaps after you've closed the financial year if your results are strong. Or you might want to wait until you've got a full year of profitability or passed a revenue milestone. Or after a new product has started to get traction.
Once you have a date in mind, you can then work back from there and plan out some interim deadlines for the exit-related projects.
Obviously these timelines can move around significantly, but having a basic plan written down will help you get organised.
π Craft your exit story
When selling your company, storytelling is key.
The best sellers create a clear narrative around the founding of the company, its growth trajectory and why now is a great time to buy.
This 'story' engages buyers, creates credibility, makes the company stands out from other acquisition options and creates a more emotional connection to buyers. It's a super power for founder-owned business who can tell their story from first idea through to today.
We've written a piece dedicated to crafting your exit story here: Telling your 'story' will attract buyers for your company.
You will need to tailor this narrative to different categories of potential buyers β we will come to that below.
You have a clear plan. There's a timeline to getting in front of buyers, and your exit 'story' has been written and refined.
Step 4: Find and pitch potential buyers
Now with a clear plan and your company prep projects happening, itβs time to start identifying and reaching out to potential buyers.
Having multiple, high-quality potential buyers for your business is key β for both the chances of getting a sale done, and the price you will get. The right buyers will move quickly, pay a higher price and give you better terms. And if there are more than one of them, they will bid up the price against each other.
So running a great process to find, evaluate and pitch buyers is a very, very high-value project.
π Make a list of potential buyers
Perhaps the most important question of all in this process... who might actually buy this company?! And how do I find them?
The first step is to think of categories of buyers, based on why they might buy you.
Acquisitions are made to deliver of one of six strategies. These strategies are broken down in more detail in 'The SIX strategies that drive M&A', with worked examples to guide you through each of the strategies.
Use this as a starting point for your research: go through each strategy, and think who might want to buy you to deliver that strategy.
This will help you create a long-list of potential buyers. This becomes the top of the 'funnel', which you can slowly whittle down to a few serious targets that become your shortlist of buyers to target.
We've explained this process in detail in A 7-Step Plan to Finding Buyers for Your Business. You'll see how to create the long-list, the factors you can use to whittle that down to a shortlist.
Your M&A advisor can really help here. The good ones will be really well-connected within your industry, and can help identify which companies are currently in the market for acquisitions (and ideally have some relationships with senior people there).
π Build relationships with potentials
Building long-term, trusted relationships with potential buyers before you want to sell is super-valuable.
It's not essential β many businesses are sold to buyers who were pitched cold as part of an outreach process.
But it can really help to have multiple long-standing, open, trusted relationships with potential companies who could be great buyers.
Why?
They understand how your business works, so it's easier for them to see the long-term value in what you're building. If you've built trust over time, they will be more inclined to believe your growth forecasts and the explanations you give them in diligence. If they've watched you grow and scale the business, they'll have more appreciation for you as a leader. They might also know and respect some of your management team.
Combined, this makes it easier for them to get excited about a deal and convince others internally to pay a higher multiple (so you get a better price).
We've written some tactics for how to start building these relationships here: How to Build Relationships with Potential Buyers.
It takes time to build trust and rapport, and you can't rush that process. So this isn't a project you can start three weeks before you want to get an offer from them.
So if you choose to invest in this area, this might mean that you need to patiently build these relationships for 6-12 months before you start getting offers.
That's OK β you can do this in parallel with the prep projects in Stage 2 above. Just bear this in mind when you are setting your timeline.
π Prepare your pitch
You're now ready to start thinking about your pitch to buyers from your shortlist.
You don't need a big pitch deck at this stage. You want a short, personalised message that specifically says that you're for sale, gives a hint of your exit story and gives them a clear pitch on why they should considering getting to know you.
Again, we've gone into this in detail already. Check out How to cold pitch a potential buyer to see a worked example, and tips for what to include and how to tailor the message to different types of buyers.
If you're working with an M&A Advisor, they will help write what they call a 'Teaser'. This essentially does the same thing β but written up in as a one-page summary document. It includes a brief background on the company, details of the product and management and very high level financials.
π Start pitching buyers
Now you can start contacting potential buyers.
This will feel like a daunting step β there might have been months of work leading up to this step.
We've got more tips on this in How to cold pitch a potential buyer.
We give you specific advice on which people to contact within a buyer (whether to go for the CEO, Head of M&A or a Sponsor), how to find email addresses, and how to personalise the message for maximum effect.
A note on volume... many people ask "How many buyers do I need to pitch?".
You should contact every buyer from your list of potentials that meets your criteria.
The number will vary massively based on your context. Niche businesses with a small universe of buyers might only contact 3-5 potentials. Those with broad appeal (especially if financial buyers could be interested) would be closer to 100 or more.
You're up and running. You've created and refined a list of buyers, built relationships and started pitching them on buying you.
Next Steps
Now that you've contacted a bunch of potential buyers, the replies will start rolling in! Congratulations, you are officially in an exit process.
You can then nurture these leads towards a formal offer.
That involves holding some initial 'get-to-know-you' meetings, helping them through an initial due diligence process, and then reviewing any offers which come back in a Letter of Intent.
That's an entire process in itself, so we're broken that down into a separate piece here: From Interested to LOI: How to get a buyer to submit a bid.