What You Need To Know To Sell Your Business
Selling your business will prove much easier if you prepare ahead of time. The worst thing you can do is rest on your laurels, take your foot off the gas pedal and assume the offers will come rolling in. You should do the exact opposite. This is the perfect time to go all out, work your tail off and maximize the value of your business.
Here's how to do it.
1. Find Valuation Comps
There is no way to gauge the true value of your business unless you understand what similar businesses have sold for. Take a look at what companies of similar size and revenue in your industry have sold for in recent years. Once you have a firm grasp of your company's true value, you will be able to make an accurate assessment of your business's actual worth. If you do not want to do the research on your own, hire a broker to help. Professional insight and research will give you an idea of what your business should sell for based on prior sales of similar businesses and current market dynamics.
2. Mind the Books and Records
Prospective buyers are primarily interested in the business's financials. You should be able to present a clear and accurate picture of what your business income is today and what revenue is projected to be across the next couple of years. Your bookkeeper should also be able to detail current costs as well as expected cost down the line. Update your books, make sure you can provide a legitimate picture of your company's finances and potential buyers will be that much more likely to bid.
3. Review Systems and Processes
The average business owner has operated his company for several years or even multiple decades. It is perfectly excusable to forget the nuances of systems and processes. Review these systems in-depth before discussing the business with potential buyers. Streamline operations as best as possible prior to putting your business up for sale. Make everything is as efficient as possible so the buyer-to-be understands he or she will enjoy a seamless transition as they assume control of the enterprise.
4. Clean the Premises for a Powerful First Impression
You only have one chance to make a first impression. Though a thorough cleaning of your business will not increase its value, an unkempt business really will convince some prospective buyers the enterprise is not worth bidding on. Consider repainting the office, replacing old electronics and installing new carpets to make your business that much more aesthetically appealing.
5. Prepare Your Employees
Wait until you are certain one of the proposed offers is worthy of acceptance before telling employees about the sale. The alternative is to notify your team of your intention to sell and watch them exit one-by-one for new positions with other companies. A depleted staff will make the business less marketable so remain quiet until you are certain a deal is in place. However, it will help to confide your intentions in a couple trusted employees. Explain your vision, ask them to help you plan for the sale and speak with staff members about the transition at the appropriate time.
6. Perform Your Due Diligence
Instead of hoping offers will roll in one after the other, be proactive by looking within the industry for prospective buyers. You just might find one or several candidates looking to expand their operations. Some of those within the industry might be interested in your business as your unique offerings will diversify their existing product line and ultimately expand their customer base.
7. Pinpoint The Right Buyer
There is no reason to rush the sale of your business unless you are starved for cash. The average buyer has less than a couple hundred thousand dollars to invest. Some prospective buyers have not owned a business of any type. Consider the buyer's motivation for purchasing your company before committing to the sale. Do not be tempted to offload the business for a low offer simply because an offer is made.
Be patient, hold out for the right offer and you will get fair value for your business. If you plan on retaining a share of the business, do not settle for a buyer with significant flaws. Finding the right buyer for 100% of your company is also important as this individual will have power over your hardworking employees. If possible, try to sell the business to a caring individual with good people skills.
8. Do Not Ease Up Until Your Business is Sold
Continue to work your hardest all the way up until the day your business is officially sold. Otherwise, you run the risk of putting your business up for sale and receiving underwhelming offers or no offers at all. Follow the advice set forth above and you just might be pleasantly surprised with the bids made for your company.
Dwight Grant is a seasoned businessman with over 30 years of leadership experience. He lives in CO where he enjoys whitewater rafting, mountain biking and spending time with family.