How to Sell a Business – Overview
Selling a business is no small endeavor.
You've most likely spent years pouring your blood, sweat, and tears into its creation and growth.
Like a child, you've nurtured it, cared for it, and are responsible for what it has become.
And just as with children, there’s a time to let go.
Image Source: Selling a Business
With all you’ve put into your business, you obviously want to get out of it as much as you can – and you deserve that.
But you have to be careful and make sure you cover all of your bases before taking the final step to sell your business.
Here's how to sell a business successfully:
Give Yourself Time to Fix Things Up
You’ve most likely put years of work (if not decades) into building your business, so it’s going to take some time to sell the business
You don’t want to be rushed and end up selling your business at a lower than you could have received.
You need to be able to clean things up and improve certain areas.
Just as with selling a house, you will want to evaluate those areas that could use improvement and decide whether working on them would increase your potential sale of your business.
The general rule of thumb is that you should give yourself at least one year before you sell a business to make sure you have proper documentation and are maximizing profits as best you can.
Make Certain Preparations – Documents and Reports
When figuring out how to sell a business, there are certain things that will come in handy when you are ready to sell.
Here are examples of documents and reports you will want to gather:
- Past few years of tax returns
- Past few years of financial statements (balance sheet, income statement, and statement of cash flow)
- Any relevant licenses
- Contracts with vendors or third-parties
- Any employee contracts
- General summary of the business
You will want buyers to be able to look at all of your documents and have a clear picture of the financial health of your company.
You also want to make sure that they are aware of any legal obligations you have through any and all contracts.
Prepare Future Strategies and Estimates
Your past financial records will be essential when it is time to sell your business, but so will future estimates.
In fact, most buyers will be more interested in the future potential of the business than what it did in the past.
If you can provide projections for future growth, profit, and other opportunities, you will put your business in a very favorable position.
Time Your Sale
When considering how to sell a business, you’ll need to have the patient to time your sale.
Basically, if you want to make the most from selling the business, you need to pick the right time to sell.
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If you own a seasonal business, make sure your sale happens during your busy time.
This may seem counterintuitive because you will be so busy, but keep in mind that your top priority is making sure your business looks attractive.
If you don’t have a seasonal business, then make sure it is in a period of growth, not contraction.
Nobody wants to buy a business that is on the decline. And if they do, they will expect a steep discount in the price.
Find a Good Broker
You may think you know how to sell a business, but if you aren’t an expert, then you won’t be able to get yourself top dollar.
Brokers that spend their days buying and selling businesses know all of the legal implications on how to sell a business.
In addition, they are able to quickly determine what makes a business attractive, and how to find the best buyers.
Selling a business is a very involved process, so you don’t want to miss something in the fine print.
Make the Right Valuation
Sometimes it’s hard to see what is right in front of you.
It’s also hard to place a price on something that you have poured your heart and soul into.
This is often the case with valuing your own business.
Many business owners believe their business is worth way more than it actually is, which makes it hard (if not impossible) to sell.
Others aren’t aware of how much their business actually is worth and thus lose out on lots of money.
When it comes time to value your business, make sure you are consulting experts that have an unbiased opinion.
The closer you are to the true valuation, the better the deal is for both parties.
Selling a business is a life-changing experience and for many it is the culmination of a lifetime of work.
Make sure to give yourself time, be prepared with the necessary documents, make your business attractive, and work with experts to get the best price for your business.
If you follow all of the steps, you will be in a better position to work with buyers and get the price you’re hoping for.
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