Selling a business is a lot of work! Selling a business can be stressful, especially if you’ve never done it.
According to statistics, a typical business owner’s net worth is 80% related to their company; thus, getting it ready for sale and maximizing value is essential to their ability to make a livelihood after the sale.
Here are the steps involved in selling a small business and how you can position yourself to get a great bargain.
Find out your business’s value
Valuing a business is never easy; you may require a valuation firm’s assistance to discover your company’s genuine value. Additionally, hiring a third-party company for the valuation will give the selling price credibility.
To find prospects and determine a fair price, the evaluator will consider everything from inventory to sales, debts, and other business assets.
It’s vital to remember that smart business buyers won’t be satisfied with cash flow alone; you may need to give potential purchasers a plan for how the company may expand and prosper without you at the wheel.
Gather your tax returns and financial statements going back three or four years to evaluate them with only an accountant.
Create a list of the hardware and machinery that is also part of the business sale. Make a list of people to contact for sales and supply transactions, and locate any pertinent documents, such as your lease contract.
Print these documents and provide them to potential buyers who can afford to buy your business. An existing operational manual and an explanation of the company’s operations should be included in your information sheet as well, if possible.
Additionally, you should ensure that the company is well-kept. Any degraded equipment or components of the business should be fixed or replaced before the sale.
Boost your sales
“You must enhance your business’s overall performance to increase earnings and, eventually, the worth of your company because businesses with robust income streams and varied revenue sources are appealing,” explains a spokesperson for Loanza, a finance startup.
“Keep in mind that selling your business when sales are down will lower your profitability. Most buyers examine sales and gross margin data to assess a business’s profitability.”
“Experienced buyers will also ask you about your agreements in force and whether they are transferable. To make your company more desirable to clients, you must boost sales and, if required, broaden your audience.
If you have a diverse clientele, multiple streams of income, and an experienced management team, the worth of your business will increase.”
Find Pre-Qualified Buyers
There are various reasons why you should accept multiple offers. To begin with, not all requests will be genuine. You must reveal confidential company information when selling your business. This can be valuable to your competitors. A rival can offer only to go into your finances or for a competitor to act on their behalf. Don’t give that information to anyone.
A business can be sold in six to eight months on average. You can always hire a sales professional to help expedite this procedure and pre-qualify buyers in conjunction with the broker. Also, don’t hurry to accept a proposal straight away. You may always leverage one offer into another to get the most value for your company.
Finalize Contracts and Legal Documents
It’s time to close the sale once you’ve identified a qualified buyer and have accepted an offer. Here is when things can start to get a little complicated and perplexing. As a result, you should delegate most of this phase to your lawyer. Typical contracts and legal paperwork related to a business transaction include the following:
- Purchase agreement
- Asset listings
- Noncompete agreements
- Website usage and domain name guidelines
- Bill of Sale
- Security agreement
You could perhaps design your purchase agreement and contract, but we highly advise against it. You have a good chance of missing important details and getting caught off guard by unplanned events. When everything is in place, all that’s left to do is sign many documents and finish the deal.