You have spent a lot of money and effort growing your business. When the time comes to sell it, the last thing you want is to sell at a loss. The goal when selling a business is to get maximum value. However, achieving this goal is never easy. You will require a lot of preparation and also involve the right professionals. In this post, we will be learning about the key steps you need to take when selling your business.
Assemble the Right Team
As you may already know, selling a business involves a very demanding process. In addition to meeting with potential investors, negotiating with them, and doing everything in your power to make your business more attractive to prospects, you have to keep running your business optimally. Juggling all these can be overwhelming. That is why the best move forward is to bring together a qualified team to help you with a business sale.
There are many professionals you can bring on board. The key, however, is to make sure you only hire trusted advisors.
Your team must include the following professionals:
- A business broker
- Commercial real estate agent. This is important if you plan on selling the business
- together with the building or land it sits on.
- Mergers and Acquisition advisor
- Transaction attorney
Having these professionals on your team will guarantee that everything will run smoothly. If you don’t feel like you have the resources to hire all these professionals, hiring a business broker might be enough. Many business brokerage firms will have the other professionals you need in their employ.
Be Certain You are Ready to Sell
The worst mistake you can make is of changing your mind about selling your business right after your business has been listed and is getting traction on the local businesses for sale near my listing site. If you change your mind about selling, you will most likely lose the trust of not just potential buyers but also professional advisors. Keep in mind that a business broker is paid a success fee. This means they will not earn their commission until they close the sale. Consequently, if you pull out of the sale prematurely, brokers will be unwilling to work with you. One way of making sure you are ready to sell is being honest with your reason for selling. There are numerous reasons why business owners choose to sell their businesses.
When selling a business, most entrepreneurs do so for any of the following reasons:
- Partnership dispute
- Retirement
- Fatigue
- Ready for new challenges
- Cashing out
- Health problems
- Divorce
- Strong buyer interest
- Business is struggling
The above list of reasons why business owners consider a business sale is not complete. In most cases, a business broker will want to know why you are selling to determine whether you will go through with the sale or not. A business broker can also help you know if your reason for selling will instill confidence in potential buyers.
Determine the Worth of your Business
A business valuation is crucial when selling a business. It is what helps you learn about the strengths and weaknesses of your business. It also helps you know the real value of your business and the opportunities that are available to help you grow. A business broker can help with the valuation.
Businesses are mainly worth a multiple of their profit. Depending on the industry your business is in and its size, your business can be worth between 2 to 10 times its profit. Smaller businesses that are valued at less than $3 million generally average between 2 and 3 times profit. For a medium business that is worth between $3 and $20 million, the multiple can range from 3 to 5. Larger businesses are those valued at more than $20 million. These can have a multiple of 5 to 10 times their profit.
It is, however, good to note that determining the value of a business is not as straightforward. Many factors have to be considered. It is only by working with a qualified professional that you will be able to get an accurate valuation.
Put the Business on the Market
Now that you know how much your business is worth, you can set an asking price. The asking price should not only help you earn a profit but also help you attract more potential investors/buyers once you start selling a business.
Confidentiality has to be maintained in a business sale. The more people learn about the sale the more likely you will lose employees, suppliers, lenders, and customers who might be afraid of the uncertain future. The sale has to be kept a secret. That is why blind ads must be used. Potential buyers must also be prescreened to ensure they have the interest and financial means to buy your business. Buyers must also sign an NDA before any information about your business is shared with them.
Conclusion
While this guide looks simple, there is a lot that goes into the sale of a business. It is up to you to make sure you have the right team in your corner to guide you through the sale. A business broker is a professional you can never afford to do without when selling a business. Their input is simply invaluable.