Selling your business can be an exciting and profitable venture.
Naturally, you put blood, sweat, and tears into running your business, but equal effort is needed when selling. Potential buyers do not come to your business just because you’ve put up a “For Sale” sign.
If you plan on selling your business, be proactive by building a business plan that allows for both start-ups and existing businesses. Keep track of your finances, be objective, and act accordingly.
Follow these 10 steps to sell your business and provide a happy return.
Have a clear reason to sell your business
If you’ve spent years building your business, earned millions of pounds, and want to enjoy your retirement, you’re probably in a good position to sell. However, if you’re in debt, running out of cash, or simply bored with your business, selling is not your only option. It is recommended that business owners also consider the following: to franchise, develop a society, merge with a similar company to go public, or to obtain a partial retirement.
Know your value
The valuation of your business is a difficult but necessary task when you decide to sell. There is no single formula to accurately determine the value of your business. However, do not judge the fairness of the appraisal based on what you think your business is worth. The value is based on criteria that can be quantified, not on personal calculation of the owner. To obtain an unbiased value, ask a third party specialist to make an evaluation.
Start with time
Selling a business takes several months, and that is if everything is in order. A great deal of planning will be involved in the process. Financial documents, such as a balance sheet and income statements, profitability, open lines of credit, and even personal problems affect both the viability of the sale and the price that the organisation will achieve in the market.
Consider hiring an agent
Some owners are reluctant to hire professional agents to facilitate the sale because they want to save 10% of these individual’s transaction fees. What they do not take into account is that the sales agents may add between 10% and 12% to the sale price. While small companies may be sold directly, some brokers have contacts with buyers that could accelerate the sale of your business or can develop a strategy to negotiate the deal. These agents are usually paid once the sale concludes.
Oversee the entire process
Meet the market. Even if you have an agent, it is important to know the recent sale prices of comparable companies. It controls whether your industry or the economy are about to fall or grow. The growth potential is key to potential buyers, who are interested in investing in an emerging market. Once you have a list of qualified buyers, you have to interview with each of them. Your interaction with potential customers will determine if your company sells.
Put your finances in order
You must have at least the last two years of your audited or reviewed financial statements and tax returns for review by the buyer. Update any pending issues with the lenders as if you hide problems or alter projections, this could affect the confidence of potential buyers. A murky financial picture of your business could ruin the agreement. Learn to set a fair price and keep an objective position at all times.
Determine how your customers are affected. If you think you can lose many customers, you may not want to make the sale public, as it could negatively affect the transaction and the relationship with your team. You have to place the sale of your business in the market with strict confidentiality. If you are looking for a direct sale, advertise in local newspapers, business magazines, and guides to creatively market and focus on a defined group of potential customers.
Tailor your business plan
In this case, the business plan will be “your story,” where you’ll include the finances of your business, sales, industry projections, recent improvements, new opportunities, and other important aspects of your business. Have you had employees for 10 years? That is a useful sales tool.
Remain in business while preparing the sale
There is no reason to lower the blinds on your business without having secured financing. Take the opportunity to add value to the business. If you have rusty equipment, change it. Sell assets that do not generate income. Do what you need to increase the financial attractiveness of your assets. Selling your business can be an incentive to push harder in the last moments of the operation, which could increase sales, profits, and the selling price.
Many owners are focused on selling and neglect the process of transition that will happen after the deal. Some buyers insist that the former owner remain there for some time to participate in the ownership and management transition.