Selling a business takes a lot of work and involves a lot of thought beforehand. One of the first things a broker, buyer and everyone in between will ask is why you’re selling the business. Many of the most common reasons are personal, such as retirement, illness, being too bored, too overworked or even disputes with business partners.
Personal reasons tend to be more common because having a problem with the business won’t translate well to selling. If you want to get rid of the company because of profit lose, why would anyone want to buy it? You have to consider all aspects of the “why” before you start getting into the “how.” If you are sure you want to sell your business for the right reasons, you’ll need a good place to start.
How to sell your business
There are a lot of steps on the road to selling your business, and one of the first is determining a value. You may know how much you want, but the worth of your company is what the buyer needs to know. Finding a third-party valuation is critical to determining how much your business is really worth.
A valuation professional will set you back anywhere from $3,000 to $7,500 to review your business and the competitive environment. While this seems a bit expensive, they are worth the money — even if for nothing else than an extra set of eyes, so the potential buyer to is more assured.
You’ll also have to clean up all the business financials before a sale can take place. Work with an accountant to get clean financial statements and tax returns. This is an integral step that can’t wait in the transaction process. The sooner you can get the finances taken care of, the sooner you can start selling.
In the same realm of keeping your finances together, you’re also going to want to look at your sales. If sales in your business are declining, buyers may not want to take an interest. People will want to buy something they know will turn a profit in their favor eventually. Assuring the potential buyers through proof of your good sales is one way to get them interested. If sales are poor, you need to find a way to boost them and catch buyers’ attention.
Most importantly, you’re going to need to find a broker. They aren’t necessary, as you could sell the business yourself, but a business broker will help so much during the process. A broker works in similar ways to a real-estate agent — they connect the business owner with potential buyers who have the right mindset. They’ll help you find buyers who are right for your business, get correct values, do research on the market and provide any post-sale assistance you or the buyer may need.
One of the main aspects of a broker’s job is to weed through the multiple offers you’ll hopefully get for your business. An experienced broker will have relationships with buyers and local banks to find interested parties in the first place and will know what to accept and what to turn down. They will also help negotiate the terms and conditions of the accepted offer.
Obstacles when selling
You will face more than enough challenges awaiting you during the selling process. Some of those challenges are ones you may unknowingly make for yourself. However, you can also avoid a lot of simple mistakes — the first of which being not knowing when to sell. Deciding to suddenly sell your business as soon as possible, circumstances aside, may not be the best course of action.
Selling a business is a long-term venture and takes, on average, two to four years to complete — even when you have a successor in mind. You’ll need to start planning a year or two ahead of the sale to get everything in order, like finances and picking out the right broker. Planning ahead will also help the buyer adjust and make them more excited rather than intimidated by the sale.
A broker will help out your selling strategy a lot but don’t expect them to do everything. A good broker is going to go out and find you a few potential buyers, but you can make things faster and less frustrating by doing some promotion yourself to sell the business. No one knows your business better than yourself, including your broker. The trick is to find the source of buyers without letting your employees and customers know you’re selling.
Get your business on the market
For whatever reason you’ve decided to sell, letting go of something you’ve likely put so much work into can be bittersweet. Finding the right buyer with more than just the correct price can be just as important. Regardless, your broker is there to help if your head and heart happen to be at odds. Selling is a long process, and there’s nothing easy about the adventure — but the rewards at the end can be worth the trouble when done right.