Everything you need to know
The time has come and you’re ready to part ways with your business. Chances are, you’ve had ups and downs, good times and bad, and you’re ready to move on to the next chapter of your life. The question becomes, how do you sell your business? What is it worth? How do you even get started with selling a business?
Selling a Business – The First Step
This step is relatively simple. Ask yourself, are you ready to sell your business? For some people, the answer will be a clear “yes.” For others, here are some things you can do to make sure you actually are ready to sell your business.
- Write a list of pros and cons
- Check your financial status (is this retirement, or are you ready for a new endeavor?)
- Is the market good for selling a business?
- Do you have a plan moving forward?
If all signs point to yes, then take the next steps.
How to sell a business
There are some very specific steps you’ll need to take when selling a business:
Determine the value – A quick tip for valuing a business is calculating 3 to 6 times the annual cash flow. The value will likely fall within that range. However, it’s best to do further research, such as market demand, location, current business economics, and financial health. Depending on the size of your business (small, medium, large), there are plenty of online resources that will guide you through the valuation process.
Clean up your finances – Make sure your books and other finances are up-to-date and in order. They should be transparent, easy-to-understand, and ready to present to potential buyers. This step should include listing all your assets and liabilities as well.
Plan your strategy – What will make selling a business easier? Will you work with a business broker, try and boost sales before the sale, or update your space or stock? Also, how long are you willing to wait? Is your business more enticing than any competitor who might be selling? Consider what strategies you’ll put in place and what each of your moves are toward making an exit.
Pre-qualify buyers – Safeguard your time and money by pre-qualifying potential buyers.
Have the contracts ready to go – There is a lot of paperwork involved in selling a business. Make sure you have everything on-hand and ready to go. If you are unsure what you’ll need, do some research so you have the process down pat. You may even wish to build in some provisions. For example, some owners will contract to consult with the new business owners for a specified period of time, so the transition is smoother. Gather all pertinent documents into one place too (like deeds, leases, etc.).
Outline your business plan and model – Many buyers will want insight into how you were successful. Have the business plan and model ready to share with the next generation.
Give yourself time
Selling a business typically won’t occur overnight. It takes planning and effort, and should be taken seriously so you can sell it for an optimal price. When in doubt, consult professionals to help with the process. Once your business is sold, you can move on to your next adventure.
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