Small Business

7 Steps to Selling Your Small Business

Selling a small business is a complicated process that necessitates a number of considerations. As you proceed, you may need to hire a broker, accountant, and/or an attorney to help guide you through the process and complete the sale successfully. The reason for the sale, the timing of the sale, the strength of the business operation, and its structure will all influence whether and how much you profit in the end.

There are several key points to consider before selling your business:

  • Selling your business begins with determining why you’re selling it, ensuring your company is in the best possible shape to sell it and then determining the sale’s timing.
  • Determine the worth of your company so that you can appropriately price it. Consider engaging the services of a business appraiser to help determine its realistic value.
  • Decide whether you want to use a business broker or try to negotiate the sale on your own – understand the pros, cons, benefits and risks of each.
  • Organize your financial statements and tax returns from the previous few years and consult with an accountant about the details to make sure they are properly prepared for a buyer’s due diligence.
  • Finding a buyer is a massive task that could take years to complete. Once a suitable buyer has been identified, a series of financial screenings and other procedures must be followed to keep the process moving forward.
  • Once the sale is complete, don’t spend all of your money at once, as tempting at is may be. Take the time to consult with a financial advisor and decide how you want to invest or use the proceeds from the sale.

How to Sell Your Small Business

Reviewing these seven factors can assist you in developing a solid strategy and successfully negotiating the sale of your business:

  1. Reasons for the Sale

So you’ve made the decision to sell your company. But why? This is one of the first questions a prospective buyer will ask.The following are some of the most common reasons for business owners to sell their companies:

  • Retirement
  • Partnership disputes
  • Illness or death
  • Becoming overworked
  • Boredom

When a business is not profitable, some owners consider selling it, but this can make it more difficult to find buyers. Take into account the company’s ability to sell, as well as its readiness and timing.

There are a variety of characteristics that can make your company appear more appealing, including:

  • Increasing profits
  • Consistent income figures
  • A strong customer base
  • A major contract commitment that spans several years
  1. Timing of the Sale

Proper planning will assist you in improving your financial records, business structure, and customer base in order to increase the value and profitability of your company. These enhancements will also aid the buyer’s transition and keep the business running smoothly.

  1. Business Valuation

It’s vital to understand how much your company is worth, so you don’t over or under price it. To get a proper valuation, it’s best to consult a business appraiser who will write a detailed description of the company’s value for prospective buyers to see and understand. The document will give the asking price more credibility and can be used as a benchmark for your listing price.

  1. Should You Use a Business Broker?

Yes, you may be able to “save” some money by selling the business yourself rather than paying a broker’s commission. However, there is also a very highlikelihood that you didn’t get the highest and best offer for your business to begin with, so in the end, you may have actually left a lot of money on the table. And while some sellers believe it’s easiest to sell directly to a trusted family member or current employee, a professional business broker and lawyer can help navigate potential pitfalls that could otherwise end up damaging a good relationship.

  1. Preparing Documents

Review your financial statements and tax returns from the previous three to four years with an accountant. Make a list of all inventory,equipment and other tangible assets that are being sold along with the business. Make a list of contacts for sales transactions and supplies, as well as any relevant paperwork, such as your current lease and any outstanding financial obligations, loans, etc. Make duplicates of these documents to hand out only to financially qualified buyers.

  1. Finding a Buyer

According to SCORE, a nonprofit organization for entrepreneurs and partner of the U.S. Small Business Administration, selling a business can take anywhere from six months to two years. It can be difficult to find the right buyer. If you don’t limit your advertising and present yourself to the broadest possible audience, you’ll be able to attract more buyers.

  1. Handling the Profits

Before you spend the proceeds from the sale, give yourself some time—at least a few months. Make a financial plan and learn about any tax implications that may arise as a result of your sudden wealth. Speak with a financial professional about how you want to invest the money and focus on long-term goals such as debt repayment and retirement savings.

Parting Thoughts

Selling a business is a time-consuming and emotional process for many people. A compelling reason to sell or the presence of a “hot” market, as well as professional assistance from a certified business broker, can help alleviate the burden and facilitate the best sale possible.

 

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