Selling a business can be a confusing, lengthy, complex, and emotional process that involves a lot of considerations. After all, you have invested your money, sweat, and hard work into establishing it. Hence, it is certainly not going to be easy and not something you can accomplish on your own. You will require a support network of accountants, business brokers, and lawyers because this ensures that you have access to the right tools and advice at your disposal at every step of the way. Whether you will be able to profit from the sale will depend on several factors, such as the reason for sale, the strength of the business’s structure and operations, and the timing of the sale.
The best way to come up with a plan and making your sale negotiations a success is to know what steps you need to take. Highlighted below are some essential steps to selling your business that can simplify the process and guide you where needed:
Step 1: Why do you want to sell?
Before you actually began the sale process, you need to understand the reasons behind it. Why do you want to sell your business? When potential buyers come across established businesses for sale, they will wonder about the reason behind it and you need to have an answer. There can be several reasons why you may decide to sell your business; you may want to retire or may feel overworked. Some people want to sell their business due to partnership disputes or due to death or illness of a partner. There are also those that decide to sell because they are bored with it.
If you have decided to sell your business because it is no longer profitable, then it may be difficult to attract buyers. Consistent income figures, increasing profits and a strong customer base can often be helpful in attracting offers.
Step 2: Consider the timing of the sale
When you have made up your mind to sell your business, you need to start preparing ahead of time, preferably a year or two before. This will assist you in improving your business structure, financial records, along with the customer base, in order to make the business more attractive and profitable. With these improvements, the transition also becomes easy for the buyer and the business can continue running smoothly.
Step 3: Get your business valued
The next step is to figure out the worth of your business because you don’t want to price it too low or too high. To figure this out, you have to find a business appraiser, as they will be able to provide you with a valuation. They will provide you a detailed explanation of the value of your business. This document can add credibility to the price you quote and can also be used to gauge the listing price.
Step 4: Do you want to use a broker?
When you decide to sell a business, you have two options; you can either sell it on your own or you could hire a broker to do so, just as you would in the case of a house. Going with the former option allows you to save money because you don’t have to pay any commission. It is also the ideal option when you are selling the business to a current employee, family member or someone you know.
However, if you don’t have a potential buyer, a broker can help you in finding one. They can free up your time, so you can keep the business up and running. Using a broker also lets you keep the sale quiet and they can also help you get the best price because their aim will be to maximize their commission. You can discuss advertisements and your expectations with the broker and keep up constant communication.
Step 5: Prepare all necessary documents
Go over your tax returns and financial statements for the last three to four years with an accountant. Make a list of all the equipment that you are selling with the business. Come up with a list of contacts related to supplies and sales transactions and also organize paperwork related to your current lease. You need to create copies of these documents for distributing them to potential buyers.
Stefano Endrizzi, the Founder and CEO of MergersCorp M&A International, says “You should also provide potential buyers with a summary of how the business is conducted and should ensure that your business is presentable. It is best for you to replace or fix any equipment or aspect of the business that’s run down or broken, before the sale”.
Step 6: Find a good buyer
You should bear in mind that it can take anywhere between six months to two years to sell a business. Finding a good buyer is nothing short of a challenge. You should advertise as much as possible because this will help in attracting more buyers. Keep two to three potential buyers in mind in case one falters. Stay in touch with them and determine if they can afford to purchase your business before you provide them with any information. Leave some room for negotiation, but stand firm if you think your price is reasonable and according to the business’s value. Always make an agreement in writing and have potential buyers sign a non-disclosure agreement for protecting your information. Documents that may be involved in the sale include the bill of sale, a non-compete agreement, and a security agreement.
Step 7: Deal with the profits
After you have made a sale, you should take some time before you decide to use the profits from the sale of the business. Know what tax consequences will be involved and understand your financial goals before making any decision. Talk to a financial professional about how you wish to invest your money and the kind of returns you want.
Selling a business is a time-consuming process and you should not try to rush it, if you want to get a good price. Follow the steps mentioned above and you will be able to make a profitable sale.
(Syndicated press content)