Selling your business is a big decision. You worked hard to build your business how do you find a buyer who understands its true value? No matter why you chose to sell your business, it takes a lot of preparation, diligent work, and patience. Here are the answers to some of the most commonly asked questions and the steps needed for a successful sale.
Steps to Successfully Sell Your Business
Step 1: Determine How Much Your Business is Worth
Determining how much your business is worth is the first step, and perhaps the most important one. It can be a complicated process as you need to consider many things like revenue, debts, expenses, and other things your business has gathered over the years. Don’t be afraid of a fair valuation, remember that a competitor may be eager to buy your business. If this is the case, they are often willing to pay more.
You have a few options when it comes to determining the value of your business. Here are a few examples:
- Asset Method: Calculates the difference between your business liabilities and assets
- Market Method: Evaluates industry competitors to come up with a general estimate
- Income Method: Takes an in-depth look at numerous factors such as income statements, growth factors, forecasting, and cost structure of your business
Choosing the right method for you will depend on your business structure and goals.
Step 2: Seek Out Financial and Legal Guidance
Certain professionals can be instrumental in helping ensure the process of selling your business goes smoothly. Hire and consult with tax, business, legal, and financial professionals. They can handle details with ease that you may not have been prepared for. These experts are beneficial for helping you make the best decisions, so you get the most value. These third-party professionals are also neutral in their approach, they are not emotionally attached to your business, so they are more rational when it comes to making decisions.
Step 3: Hire a Professional Business Broker to list your Business
To increase the chances of finding the best buyer, hire a business broker. They can help give your business visibility where it’s needed. They have well-established networks that give you access to buyers you might not find or reach on your own. Brokers also help you with setting a realistic price, contact potential buyers for you, and market your business to the best potential buyers.
Step 4: Be Realistic with Your Asking Price
If your business has been doing well, it’s tempting to ask for a higher price. However, buyers will be looking at a lot more factors before they choose to make a purchase. Think about your business from every angle as if you were going to buy it yourself.
Step 5: Gather and Organize all Paperwork
There is a lot of work to be done before you ever get your business listed officially for sale. Here are a few things potential buyers will want to see:
- Three previous years’ tax records
- Actual and projected financial records
- A strong client base demonstrated by existing agreements
- Cash Flow Report
Step 6: Separate Personal and Business Expenses
It’s easy to commingle personal and business expenses. But this can give a potential buyer a distorted picture of your business’ finances. If you have not done so already, switch to paying yourself a salary.
Step 7: Get all Your Offers in Writing
People can say a lot of things and make plenty of promises. But when it comes to obtaining offers, it’s critical to have everything in writing. This allows you to make better comparisons between offers. A written offer should contain more than just the projected price, it records all the details of the offer.
Step 8: Improve the Property’s Curb Appeal
This step sounds like common sense, but a lot of people overlook the appearance of their business when it’s time to sell. If you sell from a brick-and-mortar business, make sure it’s nice and clean, equipment works properly, make any needed repairs, and invest in landscaping. If you’re selling an online business, invest in a marketing firm to boost your online reputation and make web design changes to make the site more attractive or easier to navigate.
Step 9: Tie Up Loose Ends Before Selling Your Business
Make sure to honor all payments, promises, pay late fees, and defaults before selling. Figure out how you will handle outstanding invoices. The smallest loose end could cause a glitch in the selling process. Make sure they are all sealed up and finished, even the littlest ones.
Step 10: Keep Your Lips Sealed Until the Deal is Done
Sometimes, selling your business sends customers or clients into a panic. It is best to not mention an impending sale until you are sure of the buyer and have finalized the sale’s many details. Always, always, always, tell your clients or customers first. Then you may want to make the announcement formal with a press release.