Selling a business can be extremely rewarding. It’s a chance to cash in on years of hard work, and the profit earned from the sale could be the key to your future endeavors and financial goals. It can be quite an intimidating task however, with all of the small details and nuances required to find a buyer and close a deal. Amidst all of the challenges presented by the process is also that of trying to get the highest possible price from the sale of your business. While it’s a good idea to understand the details of appraising and selling a business, a business broker is a professional who is best equipped to navigate the course for you and help get you the most successful sale possible.
Evaluate the Market
It’s important to understand the marketplace when going to sell your business. The current market for selling is very strong. Baby boomers are fueling the market, by listing their businesses for sale as they move into retirement. While this may eventually create a surplus of inventory, right now we are in a sellers’ market due to the fact that there is high buyer demand. Funding for lending is readily available, creating a steady stream of qualified buyers. It also helps that many of these businesses are strong, healthy businesses that have been performing well and growing their cash flows and revenues. While today’s market for selling a business is very healthy, it’s important to understand that what goes up must come down. Selling a business can also be a long process, so act while things are hot to sell for the highest potential profit.
Develop an Exit Strategy
It’s always a good idea to have an exit strategy in place for your business, even if you haven’t considered selling it before. This helps to prepare you for life’s unexpected turns. Health and financial hardship can often sneak up on people, but it’s also good to account for other factors such as burnout, or the desire to change the course of your career. If you’re not ready to sell, at least consider what could bring you to that point and plan for life after it. Maybe you have a specific goal you want to reach for your business, or maybe it’s to retire at a specific age. Whatever it may be, have a plan. If you don’t have an exit strategy in place, and want to sell now, don’t worry. It is possible to sell quickly if you can make sure your financials are in order and your business is ready to show.
Prepare Your Financials
Another key factor to take into consideration is the financial health of your business. People looking to purchase a business are usually looking at its cash flow. Buyers want a business that has steady growth and consistent profits. If you have a healthy, profitable business, make sure you also have the financial statements to back it up. Detailed and consistent bookkeeping will help to tell a good story about your business and subsequently make it easier to sell. If you have sloppy or incomplete financials, it could come back to haunt you during the due diligence process, and it could cause a pending deal that seems very promising to fall apart very quickly.
Is your business set up to succeed even when you are not the one running it? Make sure that your business is transferrable. This means ensuring that you are not so wrapped up in the business that you are the only one running it. A business looks stronger and more attractive to buyers if there is a management team in place, so that the new owner will not necessarily have to make running the company their full-time job. Having a consistent revenue stream and a deep and diverse list of clients or customers also helps to draw in more buyers and boost the business’s value. You shouldn’t be too reliant on a small group of high value customers, because if they decide to walk away at any point, the business could suffer.
Costly Mistakes to Avoid
When business owners try to sell their business on their own, the chance of a costly mistake occurring is much higher than if they were to get the help of an experienced professional. One of the biggest mistakes is simply leaving money on the table. Many business owners who sell on their own do not know how to price their business accordingly, or how to negotiate the price with prospective buyers. This could result in selling the business for far below its market value.
Selling a business is a very involved process that could consume an enormous amount of your time. This could be time taken away from running your business, which could cause it to suffer. A lot of sellers focus too much on the sale process and neglect the business. It’s important to keep your financials strong and keep the business healthy. This is not only for current financial purposes, but also future ones. Keeping the value of the business up and maintaining cash flow are critical to selling a business, especially because the sale process can take a while, usually several months to more than a year.
Confidentiality is also a key component to a successful sale, that is often overlooked. When selling a business on your own, confidentiality is almost impossible to maintain. When knowledge of your company being for sale becomes public, it could put your business in danger. Competitors could take advantage and poach your clientele. Employees could become uneasy and even abandon the business. Potential buyers may even start walking into the business and asking the employees questions about it, which could lead to misinformation and a loss of productivity.
When a business is for sale, one of the first thing buyers want to see is financial information about the business. This is another area where owners who try to sell by themselves often make mistakes. Knowing when to release sensitive information about the business is critical to protecting it. Without proper advising, they risk releasing it to buyers who are not serious, or even financially qualified to purchase the business. A business broker not only guides sellers through the entire sale process, they make sure sensitive information about the business is only released to qualified, serious buyers, and only at the appropriate time. All potential buyers are required to sign a Non-Disclosure Agreement and the business is listed for sale anonymously, so the threat of competition stealing your business, private information becoming public or employees quitting is mitigated.
At the end of the day, you may realize that handling the tasks of running your business, keeping cash flow high, organizing your financial statements, negotiating with buyers and maintaining confidentiality is a tough juggling act. This is why it’s a great idea to get help from an independent third party. Accountants and attorneys can help you navigate the financial and legal aspects of selling a business, but a business broker acts as an advisor throughout the process, as well as a buffer between you and the buyer. They can assist you in finding ways to add value to the business and pricing it appropriately. Every business is different, and brokers can often find extra value where even the owner cannot. Their experience with negotiating business sales and acquisitions as well as maintaining confidentiality are not matched by any other professional. Unlike other professionals, brokers don’t get paid unless your business sells, so they are there to make sure it does.
Corporate Investment Business Brokers (CIBB) in Fort Myers, Florida is a brokerage that has been helping Southwest Florida business owners sell their business successfully, and for a high profit, for over 30 years. Our proven process begins with a free no-obligation business valuation, so if you’re considering selling your business, contact us today. You may discover that selling could be the best path to take.