How Much Do You Sell Your Business?
Knowing how to sell a business is no simple task. Even though each business sale is unique, there are a lot of commonalities and well-established approaches you can apply to get the highest value for your business.
Selling a business is very complex and involves many interconnected moves, which must be well thought-out, planned, and executed.
It is not as easy as one may think, so how do you sell one? Read on to see the next part.
Steps on How to Sell Your Business
Selling a business can be a complex process, but here are some general steps to guide you through:
1. Reason for the Sale
Getting retired, partnership disagreements, illness or death, and getting tired and bored are the main reasons people do not hold their business ventures anymore.
If a firm does not do well, some owners may consider selling it, but this could be a problem with potential buyers. Consider the company’s sales capacity, production capacity, and timing.
Your company can look more appealing by having a variety of factors, such as:
- Increasing profits
- Consistent income figures
- A strong customer base
- A big contract that covers several years.
2. Timing of the Sale
Do that as soon as you can, and at the beginning of the selling process, like one or two years from now, start planning.
You will be more profitable by taking care of financial documents, creating an organizational system, and increasing your client base with the help of planning.
Moreover, the renovations will make it easier for the customer to fit in and allow the business to continue.
3. Business Valuation
The second step is to get a valuation of your company done to make sure that you don’t oversell or undersell it. To be reviewed, the business should be appraised by an appraiser.
The appraisal will be made by the appraiser, who will then prepare a detailed evaluation of the company’s value.
The backup document will strengthen the asking price and at the same time may be used to set the listing price.
4. Hire a Certified Broker
It is possible to save money by not paying a broker’s commission since you can sell the business yourself.
This is also the best way to respond when the transaction is to a person of your trust, that is your family member or an existing employee of the company.
The broker can free you from the time obligation so that you can be engaged in the operation of your business or keep the sale confidential and get the highest price possible.
Please be sure to go over all the details with the broker and make sure you understand what is expected and how the property will be marketed.
5. Preparing the Documents
Gather your tax returns and financial statements from the last 3 to 4 fiscal years and have an accountant review them to establish a baseline.
Moreover, it is imperative to have a list of equipment that is already in the business and is sold as well.
Moreover, write a list of people to call for sales and supply transactions and find out if you have any documents that you might need, such as your current lease.
Lastly, produce photocopies of these records and give them to qualified buyers who can meet the financial requirements.
6. Find a Buyer
It is essential to note that the sales cycle of a new business may last anywhere from six months to two years.
Searching for that one customer might be difficult. Don’t limit your advertising; this will draw more potential customers.
Here’s how to continue the process if you have potential buyers:
- Just in case the initial agreement falls through, gather two to three possible buyers.
- Keep in touch with prospective purchasers.
- Before disclosing details about your company, ascertain whether the prospective buyer is pre-qualified for finance.
- Work out the specifics with an accountant or attorney if you intend to finance the transaction so you can agree with the buyer.
Finally, the buyer can need you to sign a non-compete agreement, in which case you would renounce starting a rival company and stealing clients.
7. Handling the Profits
Consult a financial advisor to determine how to allocate the funds, focusing on long-term benefits like paying off debt and saving for retirement.
Lastly, it is imperative to note that selling a business is almost the same as the owners of the business to have the guts.
It is highly recommended that you follow the steps in this article as you proceed with selling a business.
How Much Do You Sell Your Business?
Wait a bit, at least for a couple of months, before spending the sale money.
Develop a monetary strategy that covers your financial goals and check whether there are any tax consequences due to your sudden windfall.
The selling price of the business is a combination of a few factors.
One method is to determine the average EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of the past five years of your business, then multiply it by a factor that varies between three and five which is average in the industry.
However this is only the beginning, and the advice of a professional business valuation expert is required for a more precise evaluation.
This kind of expert can help you identify the specific areas of your business that might influence its value, for example, the market situation, growth potential, and industry trends.
To name another thing, they can help you to prepare the business for sale by solving any possible problems that might be there, like legal matters or too much owner involvement.
The ultimate goal is to enhance the appeal of your business to potential buyers by depersonalizing its operations and ensuring thorough documentation and systematization.
This is a great advantage as it makes the property more attractive for the new owner and less complicated to take over.
Selling a business might seem easy to some, but it’s a complex process that demands careful planning, thorough documentation, and coordinated efforts from both the seller and the buyer.
Following the steps above can ensure a smoother sale that not only fetches the right price for your company but also positions the buyer for success.