Selling your business is a personal decision. But in most cases, the choice is driven by financial incentives.
However, before embarking on your sake process, you should be honest with yourself and identify why you want to sell your company. Some common reasons for selling your company include: to gain financial independence, to ensure financial security for your family, you have realized a significant decline in profits, you want to try out something different, or you have lost important customers or investors.
Whichever the case, your business is a significant investment, and you must therefore take the sale process seriously. Check out this guide for everything you need to know about making a smart and successful sale.
Do You Want to Sell Your Business?
When it comes to selling a company, you should not make hasty decisions. This is a life-changing decision, and you, therefore, should be sure that you want to do it. Some important considerations when answering this question include:
The moment you decide to sell your company, be ready for a huge financial change. It could be that you have lost many clients and realized a significant decrease in profits. In that case, retaining the business will only drain you as opposed to selling the company to acquire quick cash.
Weigh the positives of selling and retaining the business in regards to finances before making the final choice.
Do You Have Future Plans?
You have sold your business. Now what? Do you go back home and start searching for a job from scratch? Or do you have a plan B already? It is highly recommendable to have a better plan before signing and handing over the sales document.
How Will the Decision Affect Your Life in General?
If you are the kind of person married to their business, letting it go will undoubtedly affect your life. You were used to planning the day before going to bed, waking up early, and having employees around you. But all that will be gone.
Steps for Selling Your Business
Now that you have identified that you are ready to let your company go, here are the steps to make your sale a success.
Ensure Your Business Is Ready for Sale
Selling a company is like selling a house. It would help if you renovated it and got rid of clutter to attract buyers. There are hundreds of listed businesses for sale in your sector; you must therefore transform yours and make it shine among competitors.
How do you position and prepare your business for sale? Start by getting the finances in good shape. Prepare monthly or quarterly statements to show buyers that you take your business seriously.
The other critical step to position your company for sale is to update its governance process. Make sure minutes after every meeting are well prepared and kept. Moreover, document your workers’ compensation plan and ensure your license is updated.
If you have any wins, such as partnerships and contracts, make sure they are documented. The goal is to create a good impression on buyers. Do whatever it takes to make potentials choose your business over others. This step will also ensure that you get the best value for your company.
How much is your company worth? This is a critical aspect to consider when selling your company.
Most business owners think that they know their company’s value until they have an expert help them in valuation. They come to realize that the numbers they had in mind are very different from the actual value.
A business valuation will save you from accepting a deal lower than what you should be getting. It will also help you not to overprice your company.
A lot comes into play when estimating your business value. Its financial performance should be the first factor to put in mind. Check the projected profits and how well you have been able to control costs and cash flow.
You should then calculate the value of assets and liabilities. While at this, you should sum up the assets then subtract the liabilities. Do you have any debts? Do you own valuable equipment? Such are important questions to answer during assets and liability valuation.
Calculate the value of the intangibles, such as the business’s customer base and your company’s strengths. Most importantly, do not forget to include the value of your employees when performing a business valuation.
It would help if you got the help of a third party or professional valuation for accuracy and credibility.
Ensure Your Team Is Set
You cannot possibly sell a business all by yourself. You might be a great entrepreneur, but that does not mean that you know everything about how to sell your business.
It would be best if you had the assistance of different professionals, all from lawyers, to accountants and financial planners. The experts will ease the business sale process.
Selling a business involves lots of bookkeeping and recording. The accountant will handle the transaction aspects and ensure that no funds are lost.
An attorney, on the other hand, will guide you in signing the documents. The lawyer is an expert in mergers and acquisitions, not to forget they are experienced and will ensure that all contractual requirements are met before you sign and hand over the sales agreement.
The financial planner is liable for handling your business finances even after the sale. The last thing you want is to misuse the cash after a successful sale.
Market Your Company for Sale
After confirming that everything is in order, it is time to look for interested buyers. Marketing can be daunting, and this case is no different.
You need to market your company for sale in a way that does not tip off employees, investors, creditors, suppliers, and customers. You also should keep your plan away from competitors. If you already know of potential buyers, you can go directly to them for inquiry. Otherwise, you have to go the marketing way.
There are two practical marketing approaches that you can follow to maintain confidentiality. The first one is the short gun strategy. This one allows you to cast a wider net and reach as many potential buyers, but you have to be fast.
The second approach is to present your business plan to a few individuals and offer them enough time to review and revert.
Whichever the case, you should note that competitors might take advantage of the opportunity to review your financial plans. They will pose as interested buyers. But they are only looking to steal ideas. Therefore, you should select your targets carefully and be vigilant with the kind of information you let out.
Let the Buyer Perform Due Diligence
Your sales process should be as transparent as possible. You don’t want the buyers to feel like you are hiding anything from them or that your reasons for selling the company are not straightforward.
The buyer has approximately 60 to 120 days to review and verify your company. You should be willing to provide all the needed information to validate the accuracy of your claims. Due diligence is a matter of cooperation, and the buyer expects you to provide the following information;
Financial documents: These include tax returns, profit and loss statements, account receivables, and customer sales reports.
Operational documents: They may include equipment lease documents, customer and vendor agreements, and a list of workers with their salaries.
Hire a Broker
The best decision to make when putting up your business for sale is to hire a broker. Some entrepreneurs believe that this is an expensive option and choose to sell their businesses on their own.
Nonetheless, if you look at things from the right perspective, you will realize that hiring a broker will learn that hiring an agent helps you save more than what you spend.
For starters, the broker will save you time. The expert will handle all the complex tasks as you focus on other things to speed up the sales process. Consequently, you end up with minimal errors.
The broker is experienced, and you can trust them to get you the highest value for your business. Their negotiation skills are unmatched, not to forget that they understand the market better than you do.
Business brokers are paid on commission and will therefore not rest until they land the best deal. Having a broker promotes confidentiality. Most importantly, the expert will help in marketing your business and manage the due diligence processes.
Nonetheless, you must be keen when selecting an agent. Perform background research until you find a trustworthy, reputable, experienced, and licensed broker.
You Are Good to Go on With Your Business Sale Plan
With the above guide, you are better positioned to make a sound decision before listing your business for sale. Moreover, there are no chances of making mistakes when selling your business, and most importantly, you will sell it fast at its best value.
The most important tip is to avoid making rash decisions. Confirm that you are ready to let your business go and seek professional help where necessary.
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