Selling Your Business
Selling a business can be a challenging task. Why not streamline the process by boning up on the basics before you begin? Anyone who chooses to sell a business will at some point consider seeking professional assistance. In order to establish the business valuation and market the company in the best possible manner, the vast majority of sellers turn to professionals. This strategy makes perfect sense if you have never sold a business before or if you hope to leverage the marketing reach of a reliable business broker, take advantage of resources, such as buyer financing, and to maximize the value of your business.
In order to establish an accurate business valuation and eventually sell a business for the best possible price, consider the following tips for business sellers:
Be honest about your business’s strengths and weaknesses:
A professional can help you set a realistic price: A price that’s too high will make an otherwise easy sale a major challenge. Learn what comparable businesses in your area sell for and price yours to move, not languish on a listing board. Research is the key to setting the right price, so be prepared to have a business broker to dig in and study the local market before you settle on a specific price point.
Have proof of income ready to go:
Buyers want to know the health of your business, so be ready to show verifiable documentation to prospects. This can take the form of tax returns or financial forms, such as, profit & loss and balance sheets.
Never list before the time is right:
If your business is too young (less than a year old) or still going through growing pains, now might not be the best time to list. It’s a fact that the older and more established a business is, the faster it sells.
Be willing to negotiate on price:
Few home sellers set a fixed, non-negotiable price and expect things to go smoothly. The same thing applies to businesses. Have a range in mind rather than a specific number. Depending on how motivated the buyer is, you can move around within that range before closing day.
Have analytics ready to go:
These days, sales and traffic analytics mean a lot, especially if your business is mostly an “online” affair. Google Analytics is a free service, but most business owners use multiple services to keep track of their financial health. It makes sense to have at least 6 months of analytics on hand to show prospective buyers.
Keep working even after you decide to sell:
One of the most common pitfalls for sellers is apathy. Once they list their business for sale, either through a broker or on their own, they stop working. Smart sellers continue to operate their businesses “full blast” even after listing. This keeps financials looking healthy and maintains cash flow. No seller wants to buy a business that has been slacking off for the past few months.
Make a super-detailed transition checklist:
Write down every conceivable thing that a new owner might want to know. Think about things like website login information, passwords, analytics logs, customer lists, seasonal promotion details, local vendors, and other relevant data they will want to have on hand the first day of operation.
Know how to qualify a buyer:
You’ll need to come up with some methods to make sure buyers are truly interested and aren’t just kicking the tires. Maybe a good-faith deposit is the answer. An experienced broker can help with this part of the process even if you have no idea how to whittle down a list of prospects.
Talk with a professional broker:
Even if you don’t intend to list your business with a broker, it helps to consult with one and find out the lay of the land. In most cases, a broker will agree to work with you on a non-contract basis for a flat fee. In any case, it’s almost always a smart move to at least speak with an experienced broker before you decide to go it alone.
Understand what buyers are looking for:
Put yourself in a buyer’s shoes and brainstorm about what it might be like to be on the other side of the deal. Consider that many buyers are retirees who want a steady stream of income, while others are young entrepreneurs looking for something they can turn into a hands-on career or family business. Ask yourself what kinds of buyers will be interested in your particular entity.
Understand what a good broker can bring to the table:
Like a seasoned real estate agent, an experience business broker can take care of large chunks of a transaction. Whether that means qualifying prospective buyers, structuring a complex deal, negotiating with potential buyers, establishing a precise valuation of the business, or conducting a powerful marketing effort, an effective broker can do the lion’s share of the work once you decide to list.
A business broker, when used properly, can take care of the heavy lifting when it comes time to sell a business. One of the first steps is determining the business valuation and deciding on a realistic selling price. But there’s really much more to it than that. Most people would never dream of selling a large home without the assistance of an experienced real estate agent. So, why not do the same when selling a business? Brokers can deal with forms, filings, marketing, valuation, buyer qualification, setting a smart price, and all the minutiae of closing.
Avoid the common pitfalls by teaming up with a competent broker. There’s no reason to go it alone when an experienced professional can handle the details and close the deal at a fair price.