So you've decided to sell -- now what?
There's no time like the new year to list your business for sale. However, selling requires more than just posting an ad. If you are adequately prepared, the actual listing can be a quick process. But, if you have only recently decided to sell your business, it can take as long as a year before you are ready to list it.
Still, the new year is a great time to make changes and future plans, so there's no need to panic if the second scenario sounds familiar. Instead, consider the following steps to get the ball rolling:
Seek professional assistance
Now that you've decided to sell, consult with a professional to determine the next steps. The type of professionals you enlist depends on the complexity of your business and the amount of time you are willing to devote to the sale.
Reputable and experienced professionals are necessary for avoiding legal and financial roadblocks during the sale. They can also help you reach a more favorable outcome. A professional sales team is typically comprised of several players, including accountants, attorneys, business brokers, appraisers and consultants. That may seem like a long list, but depending on your needs, it may not be necessary to recruit them all.
Determining which professionals you need on your team requires a deeper understanding of how each professional fits into the selling process. This insight, as well as a clear understanding of your own business needs, will help you select the right players for your team.
Define your goals
Before you pull the trigger on exiting your business, stop and ask: "why am I selling?" It might seem like a useless question, but believe it or not the success of your sale hinges on the answer.
There are many reasons why owners decide to sell -- retiring, moving, diversifying and burnout are the most common. Your answer and how you present it influences potential buyers' view of your business. For example, if you are clearly frustrated and burned out, buyers may hesitate to put themselves in a similar situation. The answer can also determine the speed and potential profit of the sale -- a lower price will likely result in a quicker sale versus waiting out for the highest bid.
There are also after-sale goals to consider. Are you concerned about what happens to your business after you leave? What do you plan to do next?
While some sellers prefer to maintain contact and stay on as an employee or consultant, others walk away without turning back. It's up to you to decide whether or not a significant change will have a negative impact on the business and whether or not you want to alleviate this by staying on.
If you decide to offer seller financing, you could attract more buyers and receive a higher sale price. You could also profit from collecting future interest. Yet, if the business fails under the new owner, you would lose interest income and incur expenses trying to collect on the debt.
Research the Market
Research is necessary to understand the current market and secure a fair price for your business. Luckily, the current market is strong and presents sellers with an opportunity to receive top dollar for their businesses. However, it's still necessary to evaluate the market and see where your sale fits. Compare your business with others in your industry to avoid misvaluing the sale. While undervaluing your business is an obvious disadvantage, overvaluing your business can delay and even prevent a sale.
Fluctuations in the market will provide insights about the best time to sell in your industry. A professional broker can help with this, outlining the trends and providing you with more precise timing and an accurate asking price.
After investing years of blood, sweat and tears in their companies, owners are often disappointed to learn that the real market value falls short of their expectations. To avoid this shock, get a realistic assessment of your business and then take the time to increase its value and make it more attractive to potential buyers.
Your business's value is directly tied to its profitability. Boosting sales, reducing costs and eliminating inefficiencies leading up to the sale will increase profitability and attract more qualified buyers.
Value is also tied to your business's tangible and intangible assets (goodwill). Not only is there value in you furniture, fixtures, inventory, and equipment, but also your intellectual property, branding, customer/vendor relations and reputation.
A fresh coat of paint can add value to your business, but so can a strong Internet presence. Because websites are often the first online impression you make with potential buyers, they should always look professional and up-to-date, including links to your social media pages. Consider doing a Google search of your business and check for any information that needs updating.
Are you ready to sell?
The decision to sell your business is exciting, but it shouldn't be made in haste. An impulsive urge to sell can blind owners to the fact that a beneficial sale takes time, research and preparation. It also requires guidance from the right professionals. The more time you invest in outlining your goals, making your business desirable and enlisting the right assistance, the more likely you are to experience a smooth sale process -- and receive a higher price for your company.