Selling your business requires careful planning and preparation. The business’s ability to sell, its attractiveness to buyers and timing must all be considered when listing your company for sale. There are many things that can make your business more attractive to buyers, which can include everything from organizing your financials or fixing up a store front to increasing advertising in order to spike sales and add some value to the business.
If you’re considering selling your small business, follow these seven steps in preparing to list it and execute a successful sale.
1. Prepare your exit strategy
Often, unexpected circumstances force small business owners to sell. The competitive threat of a larger business, lack of succession plan, health issues and burnout are just a few reasons why people sell. Some owners consider selling when their business is not profitable, when it is less attractive to buyers, just because they were not ready to deal with the unexpected. It is important to plan your exit strategy to stay ahead of such situations. If you start taking the steps today to prepare your business for sale, you can maximize your business’s long term value and profitability
2. Clean up your financials
Prospective buyers are looking for as much transparency as possible, performing due diligence and digging as deep as they can into everything from a business’ financials to property and tangible assets. By working with an accountant or qualified broker, an owner can work to present clean financial statements and tax returns going back at least three years, and making sure that all business income is accounted for properly.
3. Boost your sales
Generally buyers are more interested in a business when things are trending upwards. If sales are declining, it’s not the time to sell. Try to increase marketing and promotions to help boost sales and subsequently the value of your company. Having a diverse customer base also helps because buyers can be hesitant if one customer represents a large portion of the revenue, putting sales at risk if that business is lost. Expanding your customer base can prevent this from becoming an issue.
While you’re at it, aim to update your business wherever you think it could help. Retail businesses might need some light repairs, paint, or fixtures, while restaurants may update their menus or increase their quality of service. Think of way you can draw in new customers and keep them. Not only will this help boost revenue, you’ll also be showing prospective buyers your upside and potential.
4. Find a business broker
You may be great at running your business, but selling it could be an entirely different story. That’s one of many reasons to consider outside help with the sale of your company. Business brokers assist with the entire process of selling a business, ensuring that all of the necessary details are addressed, and helping to avoid common mistakes when selling your business. They will perform the business valuation and helping you to tie up any loose ends. A business broker also has a large network to locate buyers, assists with the marketing of the sale, including listing the business with suitable marketplaces, and applies a background in deal-making to negotiate the best price. In doing this, the broker also works to make sure that the details of the sale of your business are kept confidential. In short, business brokers help sellers find buyers and get the highest possible value for their business.
5. Determine the value of your company
A business valuation can provide a realistic estimate of what your business is worth. This is where an experienced business broker comes in handy. A broker will put together a review that considers everything from sales to receivables, inventory, assets and debts. Every business is unique and has different characteristics that help to define its value. A third party business valuation will take into account these unique factors, as well as the current state of the market, location, risk factors and growth potential in formulating an accurate market value.
6. Pre-qualify your buyers
Most small business transactions are paid for in part by loans, many of which are backed by the Small Business Administration. However, many deals fall through because sellers enter into transactions with buyers who cannot secure financing.
It is critical to pre-qualify your buyers, and not get too excited about an offer. An experienced business broker can due the diligence of screening and pre-qualifying buyers. This will not only make sure that you are dealing with buyers who can secure the finances for the purchase, it will also ensure that they are the right fit for your company. This creates a trust factor that helps deals close faster and more smoothly.
7. Get business contracts in order
There are many legal considerations when selling a business, including the asset purchase agreement, the contract for the sale and the purchase of the business assets, including physical as well as intellectual property. The services of a business broker can make this step less of a headache by reviewing the language of all of the legal documentation to make sure the terms are clear and well understood.
Selling a business is a time consuming venture and can have a lot of ups and downs. Utilizing the assistance of professionals can help ease the burden make sure that you get top dollar for your business. If you need advice on selling a business you own in Fort Myers, Sarasota, Naples or anywhere else in Southwest Florida, contact CIBB. Our experience and market expertise can help smooth the process of selling your business and maximize your return.