Top 5 Things to Consider Before Selling Your Business
By Space Coast Daily // July 17, 2021
Find out what you need to consider before selling your business and how to give your business the highest valuation possible.
Selling a business is a complex process. As a business owner, it’s difficult to know where to start.
But before you get lost in the heaps of paperwork required to sell your business, there are some things you might want to think about.
In this article, we’re going to take a look at five key questions you need to ask yourself before selling your business.
We’ll also show you how to get your business into the best shape possible before deciding to sell.
1. How are your finances looking?
Potential buyers will always want to see an overview of your finances. But as we all know, keeping track of finances is no easy feat.
If you’re thinking about selling your business, give yourself a head start and get your finances in order sooner rather than later.
Reviewing your finances will also help you to identify any areas of improvement. And when the time comes to sell, this will make your business far more appealing to buyers.
So what can you do to get your finances in shape?
We’ve outlined a couple of tips to help you line up your finances:
■ Consider using an accountant: An accountant will help you get your finances in order without you having to spend hours doing it yourself.
■ Upgrade your software: Make sure you have software that allows you to track your finances efficiently. This will make it much easier to keep on top of.
■ Make sure your financial records are secure: Keep your financial records secure to prevent them from getting lost or misplaced. Software like PandaDoc can help you manage your files.
2. Can you increase the value of your business?
Before you sell, you want to increase the value of your business as much as possible.
Why? Because it’ll allow you to apply a higher price tag.
■ So what can you do to maximize the value of your business?
■ Here are a few suggestions to get the ball rolling:
■ Improve your revenue: If your business has high revenue, you can give your business a higher valuation. Especially if you can show that the revenue has increased year on year.
■ Grow your customer base: A business with a large customer base is sustainable and profitable. And again, if you can show that your customer base has grown year on year, you’re onto a winner.
■ Consider selling shares: Selling stocks and shares of your business can show buyers that you have capital and that the risk of buying your business doesn’t just fall on them since there’s more than one party invested in the success of your business. The Motley Fool is a useful tool for managing stocks and shares.
3. Do you need a business broker?
A business broker is a company or individual that specializes in the sale or purchase of businesses.
Before you consider selling your business, you need to figure out if you want to hire a business broker to handle everything for you or if you’d prefer to negotiate the sale yourself.
To help you decide, take a look at some of the benefits and downsides:
Benefits of using a business broker:
■ Knowledge of the market: Business brokers have a pretty solid understanding of current market conditions. As a result, they can provide you with a pretty accurate valuation of your business and offer you solid advice on how and when it’s best to sell.
■ Understand the sales process: Unless you’ve sold a business before, you won’t have much understanding of the sales process. Using a broker means you don’t have to worry about how things work. You can leave the legwork to them.
■ You can run your business: Using a broker means you can continue running your business and making a profit while the sale is underway.
Downsides to using a business broker
■ Finding a skilled broker: You want to find a broker with some experience under their belt that has dealt with a sale similar to yours. But it isn’t always easy to find a broker who has experience in your industry and understands the market.
■ Large fees: If you’re going to use a broker, prepare to cough up some money. They usually take a chunk of commission when the sale goes through, so consider this before hiring them.
■ Their motives: Because most brokers work based on commission, there’s no guarantee they’ll have your best interests in mind. It’s up to you to find a broker that you trust to act in your best interest.
4. What does the perfect buyer look like?
When it comes to selling your business, you want to make sure whoever takes over is the right person for the job. Someone who’s going to take the company from strength to strength and make sure that your employees are in good hands.
But what can you do to find the perfect buyer?
Finding the right buyer can be a long and drawn-out process, but if you want to make sure your business is taken care of, it’s worth waiting to find the right person.
Here are a few tips to help you find the right buyer:
■ Be transparent: If you want to find the right buyer, you need to be honest about your business. Tell them everything they need to know so they’re fully aware of what they’re buying.
■ Find out more about buyers who show interest: If you have buyers that are already showing interest in your business, find out more about them. Do they have experience in the industry? Have they bought businesses before? Spend some time asking questions to figure out if they’re the right fit.
■ Contact people who might be interested: As a business owner, you’ve probably got a few connections in the industry. There’s nothing to stop you from reaching out to people who you think might fit the bill to see if they’d be interested in buying your business when the time is right.
5. How easy will it be for the buyer to take over?
Imagine you’re looking to buy a business, and you’ve narrowed it down to two possible options.
The first business has everything lined up, ready for a new owner. The finances are in check, the profits are looking good, and it’ll be pretty easy for you to step in to take over where the previous owner left off.
The second business isn’t quite so straightforward. Their financial records are all over the place, their marketing efforts lack direction, and you’ll need to do a lot of work to get things on track.
Which business would you choose? We know what we’d pick.
If a buyer knows it’s easy for them to take over a business, they’re more likely to consider making a purchase.
Now, how can you make sure it’s easy for a new buyer to take over?
Here are a couple of our suggestions:
■ Get your marketing efforts up to scratch: If your marketing strategy isn’t working for you, the new owner has a lot of work to do. Consider creating a new marketing strategy, or even using content optimization to up your SEO game.
■ Review your business structure: If your company structure is solid, the new owner won’t have to worry about restructuring. This keeps your employees safe, too.
■ Get your business up to scratch before you sell
Before you consider selling your business, there are many things to think about. We’ve outlined a few considerations in this article, but this is just the tip of the iceberg.
Getting your business ready to sell takes time. It’s up to you to find out how to get it in the best shape possible and receive the highest valuation.
Just make sure you think about this before you list your business for sale.
Author Bio: Joanne Camarce is a digital marketing expert specializing in SEO, eCommerce, and social media. She loves meeting new people and embraces unique challenges. When she’s not wearing her marketing hat, you’ll find Joanne fine-tuning her art and music skills.