Selling your business, either small or big, can be a very complex venture that means making a range of important considerations. Typically, you will need to proceed with the support of a broker, accountant, and business lawyer.
Whether or not you are set to make a profit from the sale of your business will depend on a number of factors including the reason that you’ve decided to sell, the timing of the sale, and your business’s operation strength and structure.
Selling your business is likely to take up a lot of your time and once the sale is complete, you’ll need to determine how to handle the profit in a smart way.
Keep these considerations in mind to ensure that you put together a solid plan for selling your company and ensure that negotiations are as successful as possible.
1. Why You Want to Sell Your Business
You’ve decided to sell your business – what is the reason behind that decision? This is likely going to be one of the first questions that your potential buyers will ask you, so it is important to have an acceptable answer.
Business owners will commonly sell their businesses for a variety of different reasons including retirement, illness, disputes between business partners, becoming overwhelmed or exhausted, or simply because they want to have a change of scenery and move onto something new.
You may also be considering selling your business because it is no longer making a profit or has hit a plateau, but bear in mind that this can make it more difficult to attract interested potential buyers.
Consider your business’s readiness, ability to sell, and the timing of the sale. Consistent income figures, increasing profits, and a strong customer base can all improve the attractiveness of your business to buyers.
Consider business valuers to help you determine how much your business is worth and how likely it is to attract buyers in its current state. Business valuers like WA Business Valuations can examine all the different aspects of your business to determine the price that you are likely to get.
2. Sale Timing
Ideally, you should prepare for the sale of your business as early as possible.
It may be necessary to accept that you are going to need a year or two to continue running your business while preparing it to be sold; typically, a business sale is not something that you can do overnight.
Giving yourself plenty of time to get your business ready to sell on allows you to improve your financial records, review the business structure, and invest in improving your customer base to make the business more profitable and therefore more attractive to a potential buyer.
Not only will making these improvements allow you to attract more potential buyers, but it will also help to ease the transition for the new owners and help keep the business running smoothly throughout.
3. Using a Broker
When selling your business, you can choose to either sell it yourself privately or use a broker.
Selling your business yourself is an ideal option if you want to save money by avoiding paying commission fees to the broker, and it can be the best route if you want to sell your business to somebody that you trust, such as a friend, family member or a current employee.
However, in any other circumstances, it is worth paying broker fees since a broker can help to free up time for you to ensure that the business stays up and running, or keep the sale quiet and make sure that you get the best price – after all, the more you sell your business for, the more commission the broker will get, so there are benefits for them in getting a better price too.
Before deciding which broker to go with, discuss your expectations and requirements, and ensure that you choose somebody who is willing to remain in constant communication with you regarding your business sale.
4. Preparing Documents
You will need a range of documents available in order to sell your business successfully. The first step to take is to gather all your tax returns and financial statements dating back around three to four years and go over them with your accountant.
In addition, you should also compile a list of contacts that are related to any sales transactions and supplies, and ensure that you have any relevant current paperwork available, such as the lease on your office or website hosting contract.
Have copies of these documents ready to distribute to any potential buyers. You’ll also want to put together an information manual for any potential new buyers, which should describe how the business is conducted.
5. Attracting Buyers
Along with getting everything in order, improving profitability as much as possible, and building your customer base over the space of 1-2 years before putting your business up for sale, there are several further things that you can do to make your business more attractive to buyers and improve your chance of making a quick sale at the right price.
Make sure that the business is presentable to any potential buyers; if there are any areas of the business or essential business equipment that are damaged, run-down or broken, these should be repaired or updated before advertising or selling the business wherever possible.
6. Finding a Buyer When Selling Your Business
Selling your business typically takes anywhere between six months and two years, depending on the specifics. Finding the right buyer is not always straightforward, so ensure that you have a solid advertising strategy in place to attract more potential buyers and improve your chance of a successful sale as quickly as possible.
Once you have some prospective buyers, there are a few things that you can do to get the sale in motion. Don’t rely on just one potential buyer; get at least two or three so that you have options available if the initial sale falters or falls through.
Stay in contact with any potential buyers and make sure that any prospective buyers actually qualify for financing before you give them any information about your business.
Allow some room for negotiation, but be firm at a reasonable price that also considers the future worth of the company. Ideally, you should ask potential buyers to sign a confidentiality or nondisclosure agreement to protect your company’s information.
7. Sale Profits
Once you have successfully sold your business, you will come into a sudden large amount of money. That’s why it is important to get some expert advice on how to handle the profits.
Take your time before spending the profits from the sale, get information on any potential tax consequence of your wealth, and come up with a plan outlining your financial goals.
This will be different for every business owner; you may have a plan for retirement already outlined or are looking to start or purchase a different business with your profits.
Either way, it is a wise idea to speak with a financial professional to help you determine how you would like to invest the money. Focus on long-term benefits like saving for retirement or becoming debt-free.
There are many reasons why you may have decided that now is the time to consider selling your business. Understanding the steps involved and how best to approach them will help you make a successful sale.
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I am Adeyemi Adetilewa, a media consultant, entrepreneur, husband, and father. Founder and Editor-In-Chief of Ideas Plus Business Magazine, online business resources for entrepreneurs. I help brands share unique and impactful stories through the use of public relations, advertising, and online marketing. My work has been featured on the Huffington Post, Thrive Global, Addicted2Success, Hackernoon, The Good Men Project, and other publications.