Whether you’ve thought long and hard about selling your small business or just beginning to explore the idea, there are several things you need to know before you can move forward. Use the information below to plan the most profitable sale possible.
Why You Want to Sell
You probably have a few good reasons you want to sell. After all, it’s not a decision to be made lightly. Buyers will ask why you’re selling and without a polished answer, you could do some major damage to your sales pitch. So be sure to think it through, write down your reasons, and then begin to refine your answer into a 90-second or less elevator pitch.
If you’re selling your business because profits are low or non-existent, you may have some work to do before you can find a buyer. Increasing or stabilizing profits, securing long contracts, and building a large, loyal customer base will go a long way in helping you make the sale for the profit you desire.
When You Should Sell
Selling a business is no small task – it involves time for smart decision-making, careful planning, preparation time, finding a suitable buyer, paperwork, etc. Because of this, you need to begin the process no less than a year out and preferably two.
You’ll need to have your financials and other documentation in order, a solid business structure, and an organized way to share your customer database. Giving yourself enough time to ensure buyers see your business as well-structured and organized with a positive outlook is crucial to making a profitable sale.
What’s the Valuation
One of the most important things you can do in selling your business is to get the proper valuation. This will ensure you don’t price too high or too low, which gives you confidence in your asking price as well as documentation to support your negotiations.
Because getting your valuation right is so critical, I highly recommend you find a credible business appraiser in your area. These professionals are experienced in determining the proper valuation and will provide the documentation needed to legitimize your asking price. Fortunately, this is something that ClearVision is now offering!
Who Should be Involved
Outside of a business appraiser, there are several other people who you may want to involve in the sale. Unless you’re selling to a trustworthy family member, friend, or employee, you’ll likely want to enlist the help of a broker. While you’ll have to pay a broker a commission, this decision can pay for itself in the long-run – you’ll save time and can focus on keeping the business strong while they negotiate to secure the highest possible purchase price.
Work closely with your broker to set expectations and involve your accountant and attorney in the process as needed so that you’re 100% comfortable with all terms, plans, and potential outcomes.
What Documents to Prep
Review your financial statements and tax returns from the last three or four years. In addition to copies of these documents, you’ll also want to provide the following to potential buyers:
After the sale, you may need to deal with the following documents:
Who Will Buy It
Finding the right buyer is not typically easy or fast – selling your business could take anywhere from six months to two years. To ensure the process goes as quickly as possible, deploy as much quality advertising as you can to attract buyers. Strategically think of when and where you could get your buyer’s attention and what type of advertisement would appeal to them most. If this sounds too far out of your wheelhouse, be sure to use a broker who includes advertising in their package or hire a reputable contractor to help.
After you have potential buyers on hand (it’s wise to have several), be sure to stay in close contact with them until they are pre-approved for financing. Be sure to have anyone to whom you’ll provide your business information sign a non-disclosure form. Once you’re ready to move forward with the sale, get all agreements in writing then get the signed purchase agreement into escrow as soon as possible.
How much you profit from the sale of your business depends heavily on planning. If you’re ready to move forward with the process, know that it will take time and dedication. Use your answers and the information gathered for each factor above to build your plan and ensure the sale is as smooth and as profitable as it can be.