Does your company generate losses month after month and you plan to sell it? Do you need to increase sales urgently? Many companies are in a bad situation and consider the sale without studying what is happening and analyzing other possibilities. In this post we tell you what options you have, how to develop a feasibility plan and what process to follow in case of sale.
To sell or not to sell?
First of all, it is important that you know that if your company is not viable, you will not be able to sell it , so it is necessary that you study it thoroughly to make it viable and then consider the sale.
In the event that your company may be viable in the future, you can find buyers in the following ways:
Find a buyer with whom you have synergies. A good option is to find a buyer who has synergies with your business because they want to increase the turnover, market share or have better access to financing.
Find a buyer who needs an activity like yours. Perhaps a competing company of the buyer has acquired a business similar to yours, or that your company has a new technology or an innovative business model, or that the buyer wants to incorporate a new division into the company.
According to the Report of the General Directorate of SME Policy, the five main reasons to buy a company in United Kingdom are the following:
- Achieve the leadership of the sector.
- Create value for shareholders.
- Increase market share.
- Have productive synergies.
- Increase profitability.
It is important that you know the potential buyer of your company and their needs, in order to develop a negotiation strategy in the sale that allows you to reach a satisfactory agreement for both parties.
What content does a feasibility plan have?
As we said at the beginning of the post, in order to sell your company it has to be viable and for this you must develop a viability plan.
A viability plan is a document where the business project to be created is detailed, therefore, it will have the following content:
- Idea . It is about defining the activity to be carried out.
- Market . This section details potential customers and competitors, as well as the market situation.
- Operations plan . You will have to determine the correct management of human resources that you will need (positions to be filled, types of employment contract and experience and training required). On the other hand, you must determine the material resources you need and the production process.
- Marketing plan . It is essential that the viability plan includes a marketing strategy to follow, both online and offline, so it will be necessary to define the ideal customer and the way to reach him.
- Financial plan . This is an essential section to demonstrate that the project is viable. You must determine how income will be generated and what growth forecasts for the future can be established, among other aspects such as treasury, the income statement or the provisional balance.
- This section details the administrative procedures that are necessary to start the project and the subsidies that can be requested.
What phases does the process of selling a company have?
In the event that you have made your business viable and attractive to a potential buyer by drawing up and executing the viability plan, you may decide to continue the business or sell it. If you have opted for the sale, the phases that follow are the following:
- Valuation of the company. Giving value to the company is the first step for the sale. For this, the annual accounts, the debts with public administrations or other third parties, the existence of legal proceedings, etc., must be analyzed.
- Distribution of information among potential stakeholders (competitors, complementary companies, investment funds). Once all the information about the company has been obtained and the price established, the data is distributed among potential buyers and interested parties are filtered.
- Signing of letter of intent and confidentiality agreement. Interested parties may prepare a letter of intent to show their interest in the sale and sign a confidentiality agreement so that additional information about the company is provided.
- Due diligence of the company In this phase, a detailed and very exhaustive technical study of the company is carried out from all points of view: fiscal, financial, technical, legal, etc.
- Signature of the deed of sale of the company. In the event that no contingency is detected as a consequence of the due diligence, the company’s deed of sale may be signed. In the sale and purchase, guarantees are usually regulated, among other aspects, in the event that hidden liabilities arise in the future (unknown debts, unforeseen payments, etc.).
What can MT65 SOLUTIONS LTD Business Consulting do for you?
At MT65 SOLUTIONS LTD we are experts in helping SMEs that are in difficult situations or that want to sell the company.
To analyze these cases, in our business consulting service we always start from a meticulous analysis of the company’s situation to know what is happening, why there are losses, to be able to propose alternatives and execute them. We can also help you rework your Strategic Business Plan, if you think an update to new markets and the continuous renewal of your sector would be useful.
We know that selling is not the only option, so we help you define what problems you have and how to solve them.
Posted by: Abdul Rimaaz