Selling your business to a competitor is a challenging process.
Follow these steps to ensure the transition goes smoothly. Learn how to sell your business to a competitor.
This article is a step by step guide to help you get the best possible deal for your business.
This is not the same process as any other business sale.
Here are some tips to consider when selling your business to a competitor, whether this is because you are leaving the industry, you are going into retirement or beginning a new business venture.
It is viral that you get an idea of how much your business is worth.
If you are committed to selling your business you need to ensure that you are prepared to offer your selling price.
An appraisal will help with this step by examining the stats and market facts rather than how you feel about the business personally.
Do Not Let Your Personal Feelings Get In The Way Of The Sale
If you are planning to sell to one of your competitors it's not unusual that you have pre existing feelings towards them for example mistrust.
However, your competitors are not always enemies, especially in this situation.
If you let these pre existing feelings cloud your visions you will risk losing the deal you want and deserve.
Proceed With Caution When Selling Your Business
It is important to not give too much information too quickly when selling your business to a competitor.
This is because buyers from the same industry may just be using the purchase of the company as an excuse to get information about how the business works.
The main thing to take away from this point is that not all competitors are going to be serious buyers, this is something to look out for.
A way to distinguish between the serious and the unserious would be to require a mutual confidentiality agreement, this will enable you to be sure the interested party is actually interested and not just trying to extract information.
Try To Get The Best Deal Possible
When selling your business to a competitor it is important to ensure you get the best out of the deal for you.
The financial elements of the deal is of course one of if not the most important part of the deal however there are other things to consider when negotiating.
For example, if you have employees you could negotiate that part of the deal these employees would be offered a contract of employment within the new company, following the sale.
If you do not plan to retire after selling the company then negotiating a non compete agreement would be a valuable step in the process.
Be Aware Who You Are Working With
When selling your business to a competitor it is vital to know who you are selling to and working with.
For example, working with the larger well known companies is usually pretty safe.
There are usually too many individuals involved in these companies for them to play dirty.
There is too much risk in not following the rules, people will be fired.
In addition to this, the larger companies have a much higher reputational risk, they will not want to risk behaving badly and damaging their reputation.
In addition to this, if the sale does not go through it is highly likely that these large businesses will just discard any information exchanged during the negotiation process, this will protect you.
On the other hand, smaller businesses do not share these same reputational risks and if they do behave badly there is much less risk for them.
When dealing with a smaller business you will have to trust the morality of the person you are working with.
If you do feel any doubt then it is likely they are not the correct people to sell your business to as you run the risk of your ideas being copied.
Make Sure You Are 100% Ready To Sell Your Business
It is very important to know you are 100% ready to sell your company.
It is important that you are aware of your business's value and be willing to step away from the sale if you do not feel the offer is up to scratch.
Thi is because when you approach buyers / competitors instead of letting them approach you first they are very aware you are looking to sell.
With this knowledge it is likely they will try to knock you down as much as possible.
Do Not Sell Your Business Without An NDA In Place
This is a vital step when selling your business to a competitor, as well as this you should obtain a non refundable deposit.
During negotiation it is likely the competitor will gain access to information about the trade and the business.
By putting a non disclosure agreement in place this lowers the chance that any trade secrets will be used to grow competitors businesses.
Ensure You Are the One In The Driving Seat
One of the most important parts of the process of selling your business to a competitor is to ensure you are the one in charge of the sale and the negotiations.
This is extremely important when negotiating with a competitor due to the highly confidential and sensitive information available.
Although potential buyers have the right to explore the business before purchasing it and signing the agreement it is vital that as the seller you are in the driving seat, leading the meetings and ensuring that anything that happens, happens under the correct circumstances.
To conclude, we hope this guide offers some tips to help you through the often painful process of selling your business to a competitor.
Be sure to keep these tips in mind when selling your business to a competitor.
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