The process of selling a small business can be quite difficult, and you need to make some considerations before you start. For you to sell your business, you need to include accountants, brokers, or an attorney as you proceed with the process. The profits that you receive will depend on the reasons as to why you are selling the business, the timing of the sale, and the strength and structure of the business operation.
Selling a business will take up much of your time, and once you have sold the business, you will need to come up with some ways of handling the profits you receive.
With that in mind, here are steps for successfully selling your business.
- Reasons for sale
A prospective client will ask you the reasons as to why you are selling your business. The most common reasons as to why business owners sell their businesses is because of partnership disputes, retirement, illness or death, boredom and becoming overworked. Other business owners opt to sell their business when it’s not profitable, and this can make it to a lackluster option to buyers. When selling the business, consider timing, readiness to sell and the ability to sell. There are several attributes which will make your business to sell faster, and these include:
- Consistent figures
- Increasing profits
- Strong client base
- The timing of the sale
- The location of the business
It’s ideal to prepare early for the sale of the business if possible a year or two before time. Preparing early will assist you in improving the economic records, business organization and your client base in to make the business more profitable. These developments will make the transition of the buyer simple and make the business to run efficiently.
It’s also important to consider the location of the business in the context of the total sale price. For example, if you have a business for sale in Houston, it may not be worth quite as much as a business in a more metropolitan area.
- Business evaluation
The next step is evaluating your business so that you won’t overprice it or price it too low. Get an appraiser to assess the company for you. The appraiser will have detailed information about the worth of your business and how much you should sell it. The documents brought by the appraiser will act as credibility to the price that you ask, and it can serve as a gauge for your listing price.
- Selling on your own or using a broker
Selling a business by yourself will save you money which you would have used paying a broker. Selling a business on your own is also the best route, especially if you are selling the business to a colleague, friend or family member.
However, if you don’t have time to sell the business on your own you can use a broker. A broker will help you in selling the business and will sell it for the highest time (for him to maximize his commission). Discuss your expectation with the broker and have regular communication with him.
- Preparation of documents
Prepare all your financial documents and tax returns from three years ago and have them reviewed by an accountant. Also, create a list of all the equipment which will be sold together with the business. Make a list of all the acquaintances relating to supplies and all dealings and look for important documents such as your lease. Make copies of all these official papers and give them out to all potential buyers. Also in the documents should be information on how the business is usually conducted or managed. You should also make your business presentable and fix any equipment that is damaged.
- Getting a buyer
A business might take 2-3 years before it is sold. Finding the ideal buyer for your business can be a challenge, hence you should not limit your advertising. This will help you attract more prospective buyers.
When looking for potential buyers, you should line up 2-3 buyers just in case the initial one falters. Stay in touch with the potential buyers, and enquire if the potential buyers prequalify for financing before dishing out information about your business. Also make sure to allow room for negotiation when selling your business, but stand firm on a reasonable price. Once the business is ready to be sold, make sure to put all the agreements in writing, and try to get the signed agreement of the purchase in escrow.
After you have sold the business, the buyer can go ahead and make you sign a non-compete agreement, which prohibits you from opening a competing business which will make him lose clients.
- Managing the profits
Stay for several months before spending the profits you received from the sale. Talk with a financial expert to help you determine how to spend the money and ways of investing in long-term projects like saving for retirement and getting out of any debts.
Selling a business is complicated and time-consuming. Before selling your business, you should first consider the above factors. After you successfully sell the business, stay for a couple of months before using the money and talk to a financial expert.
