Questions You Might Be Afraid to Ask When You Sell Your Business
Deciding when to sell your business is one of the hardest decisions you’ll make. Thoughts of selling your business can be motivated by a range of factors, some of which may be out of your control. They can include ill health, divorce, a need to liquidate assets or realise a new strategic path, boredom, or even becoming overwhelmed.
Deciding when to sell your business is one of the hardest decisions you’ll make. Thoughts of selling your business can be motivated by a range of factors, some of which may be out of your control. They can include ill health, divorce, a need to liquidate assets or realise a new strategic path, boredom, or even becoming overwhelmed. Consider the real reason behind your decision to sell your business, and make sure it's the right one for you before you proceed through the business selling process.
At Kakapo, we have years of experience in helping business owners sell their businesses. Here are some questions that every business owner shouldn’t be afraid to ask when you sell your business.
1. When is the right time to sell my business?
Running a business is tiring work and its common to lose energy and motivation. When this starts to affect your overall business performance and profits it also affects the sale price. If you're in the mindset of selling your business, ask yourself first if you can increase profits in the next year or two to ensure a better sale price for the future.
It’s recommended at least two years of preparation before putting your business on the market. Make sure you can produce two to three years of tax returns that are accurate and show maximum profitability to get the best price for your business. A business sale price can be based on the previous three to five years’ average profits, so if your business has performed consistently in this time, a potential buyer or investor can base their decision off these numbers. Remember that you’ll need to maintain momentum as the selling process takes a while, so you don’t want to lose your sale price advantage by taking your foot off the gas before your business is sold.
2. How much will my business be worth?
There are many different ways of valuing a business, depending on the circumstances: for example, based on earnings, cash flow, turnover or asset value. A growing business in a sector with good prospects will be more highly valued than a mature business in a declining industry. Ultimately, however, your business will be worth what a buyer is prepared to pay for it, subject to negotiation. You are more likely to be able to negotiate a higher sale price if you can interest more than one potential buyer.
3. Can I sell my business by myself?
When it comes to selling a business, you’ll need to decide if you will do it yourself or appoint a business broker. If you choose to do it yourself, you run the risk of taking your eyes off running your business. This can lead to a decline in performance and profits. If you choose to appoint a trusted business broker, they have years of experience in the business industry and can make a deal flow better and can provide you with the right insight and resources to better prepare you when you sell your business.
4. How long will it take to sell my business?
The length of time it will take to sell your business will depend on a series of factors, and on the price you are looking to achieve. The more time you have, the easier it will be to get the business in the best possible shape for sale. Once you begin the actual sale process, you will need to identify and attract potential buyers. This can take anything from a few weeks to several months.
5. How do I market my business?
It’s best to work with those that have years of experience. Business sales brokers have the relevant expertise and can make it easy for you to go through the process with as much security and protection of the identity of your business in the early stages of the marketing process. You generally cannot advertise shares of a private company to 'the public'.
Here at Kakapo Business Sales, our business brokers can help identify possible buyers, for example, other businesses in the same industry, your management team, and venture capital investors. They can also answer any questions you may have when it comes to buying or selling a business. Give them a call on 0800 494 449.