— March 27, 2019
No business decision should be made without a plan. From the creation of a business plan to having an exit strategy, all of these things come back to knowing what the plan is following it to execution. When a business is to be sold, this too must have a plan set in motion to ensure that the maximum value is gained or the company and the monetary gains from selling the business are utilized to improve the vendor’s life. Selling a business isn’t a simple task, and it can become more complicated; the more things need to be sorted out. Having a handle on these seven things can aid a business owner to figure out what needs to be done before the business goes up for sale.
1: What’s your Reason for Selling?
It makes no sense to just put the business up for sale on a whim, especially if you’ve spent a lot of your life building it. Potential buyers will want to know why you’ve put a business, especially one that is still profitable, for sale. Entrepreneur says that most business owners always have the thought at the back of their head as to when they should put their business up for sale and that many things may affect that decision including:
– Business Value
– Change or Movement into a New Industry
Owners that decide to sell when the business isn’t profitable have a much harder sell on their hands but don’t have to deal with this question since the potential buyer would have already checked the company’s performance and realized its weak state. Even so, a business that has the potential to grow will attract the right kind of buyer.
2. When are you Selling?
Setting stuff up for the sale takes a lot of time, and this should be undertaken as soon as the decision is made to sell. Even so, to finalize things may take a year or two, especially if details regarding the buyer and shareholders of the board are involved. Preparation for sale includes preparing the papers for signing over the company as well as financial records over the time that you were at the helm. An overview of the customer base and the business structure is also necessary to inform the potential buyer what they’re getting themselves into. Inc mentions that a buyer that has the seller staying on as an advisor makes for an attractive addition to the sale.
3. What’s your Business Worth?
If you were looking at a value sale, then you’d have to know how much the business is valued at. This is a simple matter of finding a business appraiser to do a valuation of the company. Good appraisers will look at the details of the assets of the company and draw up a potential value for the business as well as its potential profitability. Not only will this document impress buyers (since it does some of their due diligence for them) but it will also add credence to the price you intend to call for your business.
4. Do you Intend to Use a Broker?
Finding a buyer may take a lot of work, and depending on the type of business, might even take some marketing skill to close the deal. The option to hire a broker always exists, but as Forbes states, the decision to hire one rests with the seller. Brokers take a part of the sale of the business, and for larger companies, this might be worth dealing with them. However, for smaller firms, it may be simpler to attempt to find a buyer yourself. Referrals for business brokers are best sourced from reputable sources like lawyers or other business owners that have used them to sell companies in the past.
5. Are your Documents Prepared?
Necessary documentation of the running of the business over the last few years should be sorted out. You should comb through the most recent tax returns of the company with an accountant as well as develop a list of contacts for sales, supplies, and transactions that the next owner will need to have. Most importantly, an operating manual on how the business functions s a must for any buyer intending to keep the business running. Areas of the company that are broken down or in a state of disrepair should also be mended before inviting buyers in to inspect the premises.
6. Do you Have a Buyer?
Finding a buyer is the penultimate step in the sale of a business. Expanding advertising and have a few potential buyers on hand to mitigate when one or more of them decide against the purchase is an excellent way to keep the sale afloat. You can use a platform like Avatrade to test the market before you look for buyers. Constant communication with these buyers is essential, and this includes negotiation for the price. Having a firm, stable price is a good start in these negotiation talks since it gives the buyer a potential value to work with. All agreements you decide to make with the buyer should be put in writing to protect both parties. In most cases, a buyer will make you sign a non-compete agreement ensuring you don’t start any business that may compete with this one soon after selling it to the buyer.
7. Do you Have a Plan for the Profits?
Develop a plan as to what these profits are going to be used for and how they’ll be distributed. You should wait a few months before even decided to dip into the proceeds of selling the business. Using that money as an investment cushion is a perfect idea for that money to continue to work for you. Long term gains off this particular type of strategy can lay the framework for a long and happy retirement without a need to worry about earnings.
Selling Should Be a Goal
While a lot of business owners feel pain to part with their businesses, especially if they’ve spent all their lives working on them, many more see the sale of a company as the culmination of their efforts to make a thriving entity. In a lot of cases, businesses that have been sold have gone on under new management to create their own place in industries and even stand at the head of them. Instead of seeing the sale of a business as an end, the proceeds could be used to develop something new and fresh. The greatest businessperson is the one who knows that he or she can’t take the company to the heights it could reach and when to move on. Selling a business allows the business to grow under new vision and leadership and also allows you the freedom to move on to bigger and better things.