If you’re thinking about selling your business, the primary thing you need to keep in mind is that selling is neither a quick process nor an easy one. A successful sale is often many years in the making and involves extensive work getting everything aligned and prepared.
However, this work is both necessary and worthwhile, as a business sale, properly-prepared, can command a significantly higher asking price. It’s also nothing to fear, as small business owners are used to hard work. It’s important to apply your entrepreneurial spirit to selling your business with the same intensity that you did building it.
Make Yourself Unnecessary
Before you set a price or begin looking for buyers you need to start backing yourself out of your business. This is because you’re the one asset that doesn’t convey when your business is sold.
Many small businesses are built on the owner’s talent and a small team of employees. Prospective buyers will be leery of investing in a business that seems too dependent on its owner’s involvement as they fear that the business won’t support itself without you.
To deal with this, make a long term plan for removing yourself from the day-to-day operations of the business and begin implementing it well in advance of listing your business for sale. You want to be able to demonstrate to your prospects exactly how unnecessary you’ve become.
Freeing yourself from the daily grind has a secondary purpose as well. Your time will need to be devoted to the sale of the business, not to running the business. If you choose to manage the sale yourself you’ll be spending quite a bit of time on the process. But even if you work with a broker, the time commitment for the owner is significant. Make certain your business can run without you.
Determine Your Company’s Value
Determining the proper value for your company is a critical step in the sale process. If you ask for too much you’re likely to waste precious months chasing buyers that aren’t interested, and if you ask too little you’re cheating yourself out of the value that you spent years building.
It’s best to get professional help at this stage, to be certain your asking price is set properly. There are third-party valuation companies that will do a thorough review of your company’s financials, your competitive positioning, and your future prospects to arrive at a proper dollar amount.
If you’re planning on hiring a business broker to help with the sale, they’ll handle computing your company’s value, so you won’t need a third party.
Company value is normally listed as a multiple of either revenue or cash flow, depending on the industry. In general, higher cash flow levels will command a higher multiple, so it behooves owners to do what they can in advance of a sale to improve their company’s bottom line.
Boost Your Overall Financial Picture
The more value you can add to your business, the more you’ll be able to charge for it. Spend time trying to cut costs and boost your sales to improve your revenue and cash flow. Work on training your employees to be better at their jobs. Hire extra salespeople if the math works out in your favor.
The higher you can boost your revenues, the more your valuation multiple will work for you and the higher you can push your multiple. This means every dollar you can add to your bottom line will do its share to increase your potential sale price.
Make some positive press releases of your company, so that when a potential buyer does some research of your account they find only good news. PRWeb is a great press release site.
Clean Up Your Financials
Work with an accountant to make sure you have at least three years of clean, accurate, healthy financial documents. Prospective buyers will demand proof that your company is worth what you’re asking for it. Don’t give them a reason to balk. Be sure there’s nothing fishy in your books and that all income, assets, and expenses are accounted for.
If you have too many accounts receivable, hire a professional collection agency to help you recover money from delinquent accounts.
Find the Right Broker
Hiring a broker is usually worth the 5 to 10% commission they’ll charge for handling your sale. They’re professionals that handle business sales all the time. You’re likely very good at what you do, but you don’t sell businesses every day, so if you try and handle things on your own it’s possible for you to miss something or make a mistake.
Broker’s leverage their knowledge, experience, and their wide network of potential buyers to sell your business far more quickly than you’re likely to on your own. They’ll also pre-qualify buyers and make sure they’re a good fit for your business before you go down the rabbit hole with them.
Just be sure the broker you choose is a good fit and that they have the credentials and numbers to back up their promises.
Promote, Promote, Promote
If you opt to skip a business broker, the full sales burden will fall to you. It’s critical that you get the word out early and often. Explore all of the resources and sales channels available to small business owners and maximize your use of them.
Self-promotion is important even if you are using a broker. They will certainly make your life easier, but it’s a mistake to rely on their efforts entirely. No one know your business better than you do, so there’s no one better suited to make the pitch.
There are a number of companies that offer small business sale listings. Some of these include:
- BuyBizSell.com : The single largest online business listing service. According to their website, they’re visited by over a million business buyers a month and have facilitated more than 100,000 successful business sales.
- BuyBizSell.com : Smaller than BuyBizSell, BizQuest is still a thriving marketplace that offers relatively inexpensive business listings with no commissions and no hidden fees.
- BusinessBroker.net : BusinessBroker is a complement to the first two services on this list. They operate with a model similar to BizQuest, with a slightly smaller audience. They’re affordable, so it can be worth listing with all three.
Along with listing your business for sale in multiple places, you’ll want to network as much as possible. It’s likely that someone you know, or someone that they know might know someone looking to break into your industry. Your future buyer may already be in your sphere of influence. You need only find them.