In every business owner’s life, there will be a time when they will have to step back. Whether it be a change in lifestyle, plummeting profits or just feeling like it’s time to call it a day; if you’re thinking of selling a business, there are a few factors that should be considered before you go ahead.
If you are thinking about selling make sure you ask yourself the following ten questions:
1. Is this the right time to sell your business?
Most business owners have an innate sense of both when their best sales periods are and how saturated their local market is with similar businesses. Use this knowledge to pinpoint the best times to sell.
Market conditions for sectors ebb and flow. Consider riding out a downturn for more money in the long run.
Make yourself aware of how easy it is to obtain financing, as the availability of business loans will affect the available pool of buyers.
2. Is your business in its best shape?
If you can, give yourself 1-2 years preparation to ensure that your business looks and sounds its best to buyers.
It’s easy to want to offer your business for sale immediately, but if restorative measures are not taken then this could delay a sale.
Gather 3 years’ tax history and make any aesthetic changes - like remodelling a physical store to improving your website.
Try to settle as many outstanding debts as possible.
Businesses that are in rude health will be very attractive to buyers and are likely to redeem a larger sum than those that are tired or going through a bad patch, so ask yourself 'is your business in shape to sell?'.
3. Are your staff operating at their best?
Your staff the face of your company and their performance will be noted by any potential buyers during the due diligence process.
Make them feel valued, both to increase their productivity and soften the emotional blow when the sale is eventually made.
4. Do you know the correct value of your business?
As the business owner it is likely that your interests will be different to those of the buyer- you will be looking to make as much money as possible and they will be looking to spend as little as possible.
Valuation can vary depending on a variety of things so make sure that you assess your market, the economic trends and other similar businesses.
Overvaluing or undervaluing a business will negatively affect the sales process.
Once you have prepared your business for sale you must find out exactly what it is worth and compare that to the market rate for similar businesses.
Prepare a list of your creditors and debtors – and try to establish values for goodwill; that inherent essence of your business that makes it worth buying.
5. Who will sell your business?
From business brokers to accountants and lawyers, consider which experts can best sell your business and which qualities make them the best in their field.
As well as finding the all-important buyer, experts will ensure that the business is financially sound, negotiate the deal, draft documentation and make the sale tax-efficient.
6. What will the key negotiation points be?
Great negotiators never lie, they provide solid answers with legitimate benefits.
The negotiation process is as much about reassurance as it is price. Consider what the areas of discussion with buyers could be and prepare a set of honest answers.
7. How is your salesmanship?
You must be truthful about the pros and cons of running your business, yes, but if your sales patter isn’t up to scratch you won’t maximise your price.
Show the buyer your track record and speak with candour about the best parts of your business.
8. Are you open to selling over the long-term?
Consider whether you would agree to receive a fixed amount up-front from the seller with the remainder to be paid in installments once they are running the business.
This method, seller financing, is becoming increasingly popular and it opens up your market to those without immediate access to the total sale price.
An earn-out could lead to a higher total payment for the business overall. You could also retain a stake in the company, including owning shares.
9. Are you willing to stay on after the business has been sold?
Your skills as existing owner are an asset which you could leverage in upping the sale price.
Your buyer may have the finances and desire but not the expertise to run your small business as well as you have done.
Would you be willing to stay on after sale to train up the buyer and new staff?
10. What do you do after you have sold your business?
Even if you have no idea, why not ponder your interests outside of work and how the proceeds of sale will help fulfil your personal goals.
If you have an idea of what you’d like to do next, start researching while you are selling the business.
You may be able to subtly adapt your routine before the sale.
And finally, enjoy yourself!
Selling a business takes a considerable amount of preparation and it isn’t always quick and easy. But by asking yourself these questions you will be ensuring a successful start to the selling process.
Ready to sell? You are just 10 minutes away from advertising your business to 1.3 million prospective buyers. Sell your business today.