Selling your business can be an overwhelming decision, especially if you have given your sweat and blood to establish it.
It is important to realize that selling a business that no longer serves your financial needs, inner satisfaction or time can actually be valuable for the next phase in your professional and personal life. Countless business owners and entrepreneurs do it all the time to pursue the next best thing in their lives.
There are several factors to consider to make sure your business sells for the highest profit. First and foremost is to ensure that your business is in its best shape and that you are well prepared to sell it.
Knowing where to get started and how to obtain the best value for your business can give you the confidence to go through it.
This guide aims to make this process seamless and easy for you to follow and succeed with a secure plan.
1. Determine Reasons for the Sale
You have made up your mind to sell the business, and this cannot be without sound reasons.
This will also be one of the very first things any potential buyer will ask you, so be prepared to answer them sensibly.
Most business owners sell because of
- Being overburdened
- Achieving a new goal
- Ill health or Death
- Partnership issues
Remember, while you may be attracted to selling the business when it’s not making much profit for you, you cannot sell for this reason.
Your business must be generating significant income or in a position to thrive to appear agreeable to eager buyers.
2. Early Preparation
If you have made up your mind to sell your business, you must first thoroughly prepare for it. This can mean spending one to two years before the sale time in which you largely focus on
- Setting up your financial records
- Growing your customer base
- Improving your business structure and plan
- Ensuring a smooth transition
Timing of sale is crucial when it comes to securing the highest value for your business. Preparing well and early for it will help you demand a much higher price more confidently.
3. Determine the Monetary Worth of Your Business
Because it’s your business, it’s easier to think you know its exact monetary worth. That’s where most entrepreneurs are wrong; they either underestimate or overestimate their business’s worth.
It is much wiser to involve an unbiased third party for your business valuation to get a realistic estimate with detailed paperwork.
A qualified valuation will help set reasonable expectations and back up your claim when the potential buyer asks questions regarding your company’s worth, adding more credibility to your words.
A professional appraiser will take into account several factors like revenue trends, profit margins, potential risks, debts etc., to determine the true value of your business which might be difficult to do on your own.
4. Review and Organize Your Financials
Making sure that your financial records are in order will not only make your business look lucrative in front of prospective buyers but will also save you from a lot of hassle.
It is better to work with an accountant or business expert to prepare accurate financial statements dating from at least 3-4 years back. This should include a balance sheet, tax returns, income statement, a cash flow statement, as well as a comprehensive list of any equipment, resources, or inventories that you wish to sell with your business.
Having a pristine record-keeping will put a great impression on serious buyers, but the odds in your favor can increase enormously if you also provide copies of how your business is conducted, elaborating on the key operations.
When it comes to selling a business, being transparent and staying clean is your best shot to attract savvy buyers and dodge any confusion or disputes in the future.
If you feel that some aspect of your business is not presentable and can make your offer seem weak, do not leave it out. Instead, explain how you already have viable solutions to mend those areas.
5. Can You Sell It Yourself?
Now that all the documents are in place and the business looks in great shape to attract keen buyers, you have to consider your selling options.
Can you do it yourself, or do you need a broker?
There is no harm in selling the company on your own, especially if you are selling to a trusted party or a close relative. But if you don’t see a potential buyer in your close circle, you might have to take help from a broker to ensure the best possible price for your business. A broker can also make the process much quicker and smoother than you can do on your own. But obviously, there is a commission associated.
The good thing is that the broker also profits from the best price of your business as his commission increases, so you can trust them to work in your best interest. A broker will also maintain the confidentiality of your business, market it where required, try to make the best negotiations, finalize the deal and ensure a smooth transition and due diligence.
6. List Down Pre-Qualified Potential Buyers
You will hardly ever sell to the first offer you are made. Not to say that it is wrong, but exploring your options is always a wiser move. Having more offers will help you leverage one offer for a better one to maximize your profits.
The key here is to engage with the pre-qualified buyers. This is to ensure that your precious time and resources are not wasted on unqualified buyers who later pose problems with securing loans, a down payment and an agreed timeframe. To make this process painless, you can hire a sales expert to pre-qualify the buyers for you.
Most business transactions require a third-party loan from SBA and can take anywhere from 6-8 months to sell a business.
Finally, with all the steps done, it’s time to seal the deal, and most of this part stage is handled by your lawyer.
Selling your business is not a straightforward and quick process, but the above-mentioned steps will definitely simplify the daunting journey.
Whenever you plan to sell your business, it is important to always have an exit strategy clearly mapped out for you and move forward with realistic expectations and timeframe in mind.
Thinking about selling your business? It’s hard to know where to begin. How do you find qualified buyers? What’s your business worth? How can you vet prospects? If you want to sell your business quickly and discreetly, then contact Cowen Partners