7 Steps to Successfully Sell Your Business
There are many reasons you would want to sell your business, but doing it successfully is another question. We break it down in simple steps to point you in the right direction.
Whether you are ready for your next career move or planning to retire, you may decide to sell your business. You’ve invested a lot of effort, equity, and time into growing your business, so the main goals are to get the maximum value and ensure that everything is done right. And if you don’t know where to start or how to find a reliable buyer, follow these tips to secure a successful deal.
1. Preparing to sell your business
Preparations for the business sale should start as early as possible, ideally 6-24 months before the actual event. This will give you the time to organise your business structure, customer base, and financial records to make your company more profitable and appealing for future buyers. Most buyers are likely to deduct a significant amount from the asking price if one or several areas of the business are not presentable or have shortcomings.
2. Business valuation
The first question most people ask when they want to sell their business is "how much should I sell my business for?". The next step in this process is to determine the right worth of your business to ensure your price isn’t too high or too low. To get a detailed explanation of the business’s worth, it’s highly recommended to obtain a market appraisal from a professional business broker. A market appraisal is based on current market data and will serve as a gauge for your asking price.
3. Reason to sell your business
Buyers always want to know the reason for the sale of the business. They are concerned you may be selling a business because of competitor dominance, declining industry, or some other undisclosed matter that might hurt or negatively affect the business in the future. That’s why buyers want to hear a logical and valid reason and without it, they may assume the worst and either offer a lower price or simply walk away.
4. Preparing documents
Gather all the tax returns and financial statements dating two to three years and review them with an accountant. Then create copies of all the necessary documents such as your current lease, list of equipment that’s being sold, list of contacts related to supplies and sales transactions, up-to-date operating manual, and distribute them to the financially qualified potential buyers. Also, make sure that all the equipmƒhoΩent or areas of business that are run down or broken are fixed for the business to look presentable.
5. Consider the service of a business broker
Although you might be well experienced in sales and acquisitions, having a team of professional brokers by your side is a great opportunity to get an outsider’s opinion on the business’s value, strengths, and weaknesses that can help greatly with setting your sales expectations. They will play the most essential role in the sale of your business, therefore you need to make sure they are highly qualified and experienced in all areas of selling businesses including deal structuring, problem-solving, tax matters, business valuation, creative solutions, as well as listing your business for sale to the right places.
6. Negotiate effectively
Once you identify the qualified prospect buyers, plan out your negotiation strategy carefully. If you are working with a team of advisors, follow their advice as they will facilitate the process. Always have a clear goal in mind and don’t allow yourself to become emotionally involved or get hung up on technicalities. Rather, focus the negotiation on the things you and the buyer have in common and start by settling the easier points and then slowly transition to the more difficult ones. You will also need to spend enough time brainstorming various options with your brokers to come up with as many solutions as possible before you reach the negotiation process.
7. Close the deal quickly
Even the most reliable buyers can change their minds overnight. So, after the prospective buyer has finalised the decision to invest in your business, get a non-refundable, good-sized deposit alongside an offer to purchase in writing. After the offer to purchase agreement has been signed, start the process of preparing all the closing documents in order to close the deal as soon as possible. Always keep in mind, your business isn’t sold until you have the money in your hand.
Selling a business is a complicated, risky, and time-consuming process, let alone a very emotional one. That’s why getting help from professionals can greatly ease the burden and let you optimise your time and effort while allowing you to focus on the most important task at hand.