One day you came up with a great business idea in your mind and soon you started your own company to materialize the idea. Today, after 4 to 5 years, you are planning for further expansion of the business so that it can increase your sales and bring you more profits. Usually, at this point, there are mainly two options to choose from– either you sell your business to a bigger company who is interested in it or you start looking for an investor to provide you with the required capital for expansion.
Now whether you want to Sell or Finance Companies is all up to you, but there are certain things that you need to take care of before you approach a buyer or an investor. In both the cases, the biggest requirement is the proper valuation of your company. The moment you start thinking about selling or financing your company, the first thing you need to do is determine the value of your business.
Evaluating the value of your business will help you price it rightly, neither too high nor too low. Professional investors like the venture capitalists are very particular about the value of the business they are planning to invest in. Although they are not buyers but knowing the value of the company helps them to decide whether it is worth the investment. You can hire a business appraiser to do the valuation for you in case you are not confident enough to do it yourself.
One more thing you have to remember, you have to start your preparation as early as possible, say, if you plan to sell or finance your company, you must have sufficient time to take it to that position where it can attract a buyer or an investor.
You can improve the business in many ways like increase your productivity, improve your business model and your customer base. These are certain things in the absence of which it will be impossible to find a buyer or an investor. The improvement you make will help the buyer in future transactions and ensure that the business continues to run smoothly. The preparation period will also include getting all your documents at the right place like your financial statements, tax returns, contact list, equipment list, etc.
Your next task would be to find a buyer or an investor depending on what you want to do – sell or finance your company. If you want to sell it, you need to find a buyer. Now, you can either do it yourself or take the help of an agent. If you are selling the business to a family member or a friend, you won’t require any agent. So you don’t need to pay the agent’s commission and save that money. In other cases, you will definitely need an agent to get you buyers and you know they will bring you the best possible deal as it is also in their own interest.
You can create a list of potential buyers and stay in contact with them on a regular basis. Once you find the right buyer, make sure you leave some scope for negotiation although you must not go unreasonably low to please the buyer as it may hurt the company’s credibility in future.
If you are planning to finance your company, you can start looking for a suitable investor. Usually those businesses which have a high market potential but are not bankable, often manage to attract the venture capital firms. If you think your company has that potential, you can definitely consider approaching a venture capital firm for funding. Make sure the firm you approach is interested in the industry you are dealing with and has a list of portfolio companies relevant to your industry. The stage of your company will also be a deciding factor in choosing the right investor as everyone has their choice, like some prefer to invest in the seed-stage while some prefer to invest in the second or third round of financing.
Your biggest requirements will be a unique business idea, a highly-efficient management team, an innovative business model, a proper business value, and of course, a sizable market. Finding a suitable venture capital firm can remarkably boost your business and help it grow and expand enormously.
Selling or financing a company can significantly increase your company’s credibility, sales opportunities and revenue generation. In both cases, you can expect to earn huge profits provided you prepare for it well and make sure everything falls in place till the ultimate paper works.
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