Important Steps for Selling a Business
Think about all of the resources you’ve spent building your business over the years. Consider the money, time, and sweat equity you’ve put into helping it grow and thrive, and all the challenges you’ve faced along the way. As you prepare to sell your business and move onto the next chapter of your life -- personally and professionally -- you shouldn’t do anything without having a solid plan in place.
This won’t be an easy process, and it certainly won’t be uncomplicated. However, following some important steps can help the process seem a little less daunting and help set you up for success when the sale is complete.
Ask Yourself “Why?” & “Why Now?”
Anyone who is involved with the sale of your business will have the same question at some point or another: Why are you selling? And why now? Make sure you have the answers. Retirement, illness, issues with your partners, and divorce are all common reasons that business owners decide to sell.
Ultimately, whatever your “why” is, you need to be selling a business that’s attractive to potential buyers. Even if you’re facing a major life event that has become a catalyst for a sale, you’ll need to ensure that the business is marketable. Profits need to be up, revenue needs to be consistent, and you’ll need to show that you have a strong customer base in place. Even if you’re ready to sell, the timing may be off if your bottom line is in the red.
Think About Valuation
Knowing how much your business is worth is another crucial factor for a successful sale. Working with a broker will give you access to business appraisals, which take into account all of the various moving parts mentioned above that buyers look for. While it may be tempting to go with a higher price to pad your profit margin, or a lower price to move it quick, business valuations are highly accurate and based on real-time information.
Prepare Your Paperwork
After getting your financial house in order and getting a valuation for your business, it’s time to get all of your documentation up to date and well organized. Go back 4 years (or more, if your broker advises it) and collect tax returns, and review them with your business accountant. Create detailed lists of any equipment that’s included in the sale, and compile lists that include detailed information for clients, suppliers, and vendors you work with regularly.
Make several paper copies of this documentation along with saving them into a digital file to give buyers that are seriously interested in your business. It’s also a wise idea to update operating manuals or standard operating procedures, along with any information on how you run your business on a fundamental, day-to-day basis; include payroll information, job descriptions of the different roles in your business, and any human resources paperwork you’ve used.
Putting It On The Market
Just like it took time to build your business and prepare it for a sale, it will also take time to find the right buyer. In fact, it could take up to two years to close the deal. Don’t overlook the value of marketing your business -- better yet, work with a broker you can trust to help expand your reach. Brokers have vast networks of professional contacts who are looking to buy, becoming the bridge that connects you with someone who’s ready to sign on the bottom line.
After getting the attention of prospective buyers, don't stop! Don’t put all of your eggs in one basket; keep backup buyers in your pocket in case the first deal falls through. Keep communication transparent and open with all parties, and always get any agreements in writing. Remember that you may also be asked to sign a non-compete agreement or include a clause in documentation that prevents you from starting a new business that competes with the old one.
There’s also a good chance you’ll stay on for some time to help the new buyer adjust and learn the ropes. This transition will be decided on during the sale process, and will be helpful for paving the way for the business to stay successful in the long-run.
Selling your business is never an easy decision, and it’s an even harder process to tackle on your own. Navigating through these tricky waters means working with a broker that understands what it entails and has a deep working knowledge of local markets. When you’re ready to make a move, reach out to Acme Advisors & Brokers to get the conversation started.