The sale of your business is a complex process. You may need the services of an accountant, broker, or attorney. There are many risks if you fail to prepare enough or follow the right process as you sell your business.
If you conduct the sale poorly, you could lose a lot of money. Furthermore, your investment and hard work would have been in vain. How do you successfully sell your business?
1. Why Do You Want to Sell Your Business?
The first step of selling your business is acknowledging the reason for selling. Some of the most common reasons business owners sell include:
- Illness or death
- Partnership disputes
- Getting overworked
- The business is not profitable.
- It will be harder to attract buyers if your business is not profitable. A company that attracts buyers has the following characteristics:
- It is profitable
- A business with a strong customer base
- It has a significant contract.
- A consistent income
2. How Soon Do You Want to Sell Your Business?
You need to make the decision and prepare to sell early enough. Give yourself a duration of about one or two years before selling. Use this period to strengthen your customer base, make yourself more profitable, and prepare adequate financial records. The preparations will make the transition easier.
3. What Is the Worth of Your Business?
You need to know the worth of your business to get an appropriate value for sale. The knowledge will ensure you avoid selling too low or too high. You may need to enlist the help of an appraiser to evaluate your business. They will generate a document that details your business’s value and make your asking or listing price more credible.
4. Do You Need to Use a Broker to Sell Your Business?
You can choose to make a direct sale or use the services of a broker. A direct sale saves you the cost of broker commission. Moreover, it is a better option to sell your business to a family member, friend, or a current employee.
On the other hand, brokers will let you focus on making the business more attractive as they search for a buyer. Furthermore, the broker will aim to get the highest price possible because it maximizes their commission. Ensure you are in good communication with your broker. Please talk about your advertisements and expectation with them.
5. What Documents Do You Need for the Sale of Your Business?
A significant transaction like the sale of a business requires some documents to actualize the sale. You can share some of the papers with potential buyers. These documents include:
- Tax returns and financial statements that go three to four years back
- List of equipment that is part of the sale
- Contact list of parties involved in sales and supplies
- An operating manual
- The bill of sale
- A lease assignment
- A security agreement
- A non-disclosure agreement to protect your business information
6. How Do You Find a Buyer for Your Business?
It may be challenging to find a buyer for your business. The process can take between 6 months and two years. It would help if you advertised more to make the duration shorter. You can use traditional advertising (word of mouth, billboards, etc.), social media influencers, and more. Once you find potential buyers, you need to start the appraisal process. It includes:
- Contact two or three buyers in case one decides against the purchase
- Find out if the buyers qualify financially before you give any of the sensitive business information
- You will need a lawyer and an accountant if you choose to finance the sale yourself
- Be firm on your price but give room for negotiations
- Request the buyer to sign a non-disclosure agreement for the safety of your business information
- Sign the purchase agreement and put it in escrow
7. How Do You Manage the Profits?
It would help if you remembered that you had invested a lot to build your business and made a huge decision to sell it. Thus, you should manage your profits well to ensure sustainability and growth. Take a few months to carry out some financial planning before you spend the profits. You may need the help of a financial professional who will advise you on further investment. It is better to focus on long-term goals such as retirement and getting out of debt. Moreover, you should find out your tax liability from the sale to avoid any legal issues.
The sale of a business is a big decision and not an easy one. You need to prepare for the sale adequately. Planning, both financial and physical, has a lot of influence on how the selling process goes. It is advisable to prepare about two to three years before the sale. You may need to enlist professional services like accounting, broker, and attorney services. As you make the sale, remember the necessary documents such as financial, confidentiality agreements, and more.