Selling your private company can be a life-changing event. Along with excitement for the future, sellers commonly feel anxiety and stress about the potential sale process. While private company sellers are often very successful entrepreneurs, most have limited experience with sale transactions and may not know what to expect or how to prepare.

Below are 10 steps you can take to ensure a more efficient and effective sale process.

1. Hire an M&A Advisor. While some sellers are approached by a competitor or other interested party directly and don’t require help in finding a buyer, the vast majority of private company sellers don’t know how to best market their business. Among other things, M&A advisors perform four key functions: (i) review your business operations and financials and suggest key areas to focus or improve on before launching a sale process; (ii) prepare your marketing materials and identify potential interested parties; (iii) manage the sale process and help you select the buyer; and (iv) together with your lawyers, help negotiate the sale, leaving you with more time to continue to operate your business. In our experience, the vast majority of founder/family-owned private-company sale transactions are run by M&A advisors. We recommend sellers interview a number of firms to ensure they have the necessary experience and expertise to assist. The best part? They help you get a much better sale price than you would on your own.

2. Retain Experienced Legal Counsel. Sellers need to ensure they have hired competent and experienced legal counsel who can guide you through the sales process. They should have significant experience working on the sell-side of private company sales and acting for sellers such as you. Not all lawyers are created equal or have experience working on private company sales. While you may be using a lawyer now for general matters, they may not be appropriate to advise you on an M&A process. This may be a once-in-a-lifetime opportunity for you, and you need to make sure you choose counsel that reflect the importance of this event. Counsel play many roles on a transaction — educators, confidants, negotiators and advisors. Ask your colleagues or advisors for referrals. Meet in person and understand their credentials and experience. Get references from prior deals. Consider which firm they work for to ensure they have the right specialists to help with all aspects of your sale (M&A, employment, real estate, tax, etc.). Your lawyer will play an integral part in the success of your sale, so find one that you believe you could work well with and has the experience to guide you.

3. Review and Update Your Corporate Records. It’s no surprise that private-company corporate records may need some fine-tuning. After all, running the operations side takes a lot of work, and keeping complete and accurate records can become less of a priority. Yet, accurate record-keeping suggests good corporate controls and governance and builds trust with buyers. It can also lead to fewer issues in due diligence and a more efficient sale process. So, review your customer and supplier contracts to see which ones are unsigned or incomplete, ask your accountants to make sure your financial records are up to date and have your lawyer review your minute book and other legal records for omissions or inconsistencies. A bit of review and clean-up upfront may save you some significant time and costs down the road.

4. Re-Examine Your Related-Party Contracts. Many closely held family companies have related-party contracts (i.e., contracts between the target company and its owners or their relatives). From lease contracts with family real estate companies to employment contracts with siblings or children, as well as “related-party” loans to shareholders or other family members, many of these related-party contracts are not on market terms or include provisions that will not be appealing or acceptable to a buyer. Consider which ones are really necessary for the business and can be justified to a buyer. For those that are not, many of them will have to be renegotiated or terminated as part of the sale.

5. Coordinate Your Internal Deal Team. You will almost certainly want to keep your potential sale confidential to avoid stress and anxiety with your management team and employees. However, sale processes take a lot of work, and you will likely need help from people familiar with the business. Most sellers select some key internal management personnel they can trust (CFO, HR manager, etc.) and ask them to assist. Careful consideration should be given with respect to who can spare the time and whether they have the necessary skills and motivation to make the process successful. In some cases, the deal teams are promised/awarded with “stay” or “closing” bonuses payable on the completion of a sale as an extra incentive.

6. Consider Your Tax and Financial Planning. You are (hopefully) about to come into a serious amount of wealth. Many sellers have the foresight to consider if there are any financial, tax or estate planning objectives they hope to implement on the sale (such as family trusts). It is advisable to consult with your accountants and financial advisors to determine the best way to achieve these objectives, and then work with your tax and legal advisors about how best to implement them.

7. Determine Your Post-Closing Objectives. Transactions can take many forms. Sometimes a seller will do a “full exit” and leave on closing. Other times, a buyer (especially if it’s a private equity company) will want you to “roll over” some of your equity and remain invested and involved in the business after closing. This is so you can assist with “transitioning” the business to the new owner. Some of these options may be acceptable to you while others may not be or require more exploring. Consider what your goals are for the period after the sale closes and be sure to communicate them to your advisors.

8. Pay Attention to the LOI. The letter of intent (also know as an “LOI”) is often the first substantive document you will enter into with a buyer. It will set forth the general parameters of the deal, detail the potential deliverables and preliminary timing for a deal, and set forth the items that still need to be confirmed between the parties before a more formal purchase agreement can be agreed upon. While the terms of an LOI are normally “non-binding” (with some exceptions), it’s an important document because it sets out the parties’ general expectations that are hard to move away from down the line. Be sure to review it carefully with the advisors and understand what you are agreeing to before signing.

9. Become Informed About the Buyer. Your instincts have brought you this far, so continue to use them. While your advisors will work with you to get you as much protection as they can in the deal documents, you need to ultimately trust the buyer, especially if you will remain with the business post-closing. Do your own due diligence. Ask your advisors what the buyer’s reputation is like in the market. Consider what other transactions they have done and learn as much as you can about whether they have been successful. Spend time with the management team of the buyer and determine whether you could have a good working relationship with them after closing. Ask what your roles and responsibilities will be like. Confirm your goals and objectives for the business are aligned. The more information you have, the more likely you are to select a buyer you are comfortable with.

10. ​Look Into Restrictive Covenants. What are your plans after you sell your business? Almost all sales agreements will include “restrictive covenants” that will prevent you from competing with the business you just sold for a period of time after closing or hiring away the employees of the business. Consider what your plans will be when the deal is done and make sure they will not be impacted by these restrictions. Speak to your legal advisors about your plans so they are taken into account when negotiating these restrictions.