Imagine you want to sell your business. Or you’re considering joining forces with another staffing company. What should you know before entering into discussions? Jurgen van Dijk of M&A firm Stepstone Corporate Finance+ shares five tips.

Do acquisitions actually create value? Or is selling a business simply value destruction? “No, that’s nonsense,” says Jurgen van Dijk. “Those conclusions come from studies based on public financial data, mainly derived from deals between listed companies. Those companies are run by managers, not by an owner-entrepreneur making decisions with their own capital. Ego plays a much smaller role, and so-called ‘herding’—where CEOs of large companies copy each other in high-profile acquisitions—does not occur in the SME context.” According to Van Dijk, a successful deal depends on a well-prepared and well-timed sale.

1. Take your time
That’s the first tip: allow sufficient time to prepare for a potential sale of your business. For example, if you plan to exit in six years and selling to private equity is an option, you should start today, says Van Dijk. “Private equity firms that see your company as a platform for further acquisitions typically require you to remain involved for around five years as CEO and minority shareholder. This can be financially very attractive.”

You should also time your exit with economic cycles: during a recession your business is worth less, and potential buyers are often focused on other priorities. “This also applies to private equity. Especially in the first year of a recession, they are inward-focused: most of their time goes into stabilizing their existing portfolio. Only after about a year do they start looking for new investments again. Buyers have then fully priced in the new reality, while sellers may still be anchored to valuations from the previous boom. That gap only closes later.”

Finally, a sale process typically takes seven to nine months. Acquisition processes often take longer, as it is rare for a party to be immediately open to selling.

2. Price is not the same as valuation
Don’t focus too much on a valuation report: it has limited value, although it can provide useful insights into the key drivers of your company’s value. “Ultimately, as a shareholder, you care about the price. Value and price can differ significantly. A professionally run sale process will lead to the optimal price, which may even exceed the valuation.”

Also realize that historical results are of little importance to the company’s value. “And don’t be overly influenced by multiples supposedly paid for other companies in your sector. In our experience, there is a lot of noise, and every company is unique.”

3. Get the right advice
A professional and independent advisory firm is invaluable. But make sure it’s the right fit for you. “A common mistake, driven by greed, is choosing the advisor who promises the highest price. That advisor is not the buyer and won’t make up the difference for you.” It is better to engage a firm with experience in your sector. If you expect interest from international buyers, it’s important that your advisor has an international track record.

An advisor not only helps secure a better deal but also takes much of the workload off your shoulders, allowing you to stay focused on your business. And that is crucial, says Van Dijk. “Remember that in the year you sell, your revenue and profit figures are under close scrutiny. Every additional €100,000 in operating profit can translate into €700,000 in value at a multiple of 7.”

Your accountant may seem like the first point of contact, but Van Dijk advises against relying on them for M&A advice. “M&A advisory and accountancy are different disciplines. Accountants focus on historical accounting profits, while good M&A advisors focus on future cash generation. That said, your accountant can add value as a trusted member of the project team.”

It is, however, essential to engage a good and specialized M&A lawyer. “A top-tier law firm is often not necessary; a strong alternative is an M&A boutique founded by professionals with experience at large firms. You often receive more attention and more competitive pricing.”

4. Create a realistic forecast
An ambitious yet realistic forecast is crucial during the process. Spend sufficient time on this with your advisor, as it can directly impact the outcome: “During the process, buyers expect monthly ‘current trading updates.’ Beating your forecast fuels the deal, while underperformance can seriously damage trust.”

5. Step back
Potential buyers are wary of companies that are highly dependent on the owner. “This is a common challenge. If you plan to step away after the sale, it is advisable to take a significant step back at least a year in advance and give your management team more responsibility. This is especially important for private equity buyers.”

Don’t keep your plans to yourself. Inform your management team early. Reward them appropriately for their role in the process. “It is common to link incentives to both the successful completion of the transaction and the retention of key personnel after the deal. This also reassures the buyer that the management team will remain in place for at least two years post-transaction.”

With these tips, your chances of success are significantly higher, Van Dijk concludes. “And even higher if you engage a specialist. Our track record shows that a well-prepared and well-timed sale has a success rate of over 95%. And remember: our fee model is fully aligned with our clients’ interests. If we don’t achieve a successful deal, it hurts us too.”

This article was recently featured on fleXmarkt.nl.