If you are a small business owner who wants to sell their business, then you’re probably anxious to do it quickly. Perhaps you have accumulating debts that you need to pay off or maybe you have another venture that you want to move on to. Regardless of why you want to sell your business fast, you need understand the procedure and strategies involved before doing so.
The term "small business" typically refers to a privately-owned company that is worth less than $1 million. If your business is publicly traded or worth more than $1 million, it simply won’t be something that you can sell too quickly because there are a lot more variables involved. A private company worth less than $1 million is easier to sell fast because there is less money involved and the owner has complete control over their company. The two main elements that you’ll have to concern yourself with are finding the right buyer and internally preparing your company for the sale. But, how do you do this? That is what you will find out.
The Three P’s
When it comes to finding the right buyer for your business, you need to have a reasonable asking price while knowing how to effectively market your offer to them. After that, you must be willing to wait for the right buyer to come along and see your offer. These steps represent the three P’s: Price, Promotion, and Patience. This means having the right price, the right promotional strategy, and then having patience until you get a good buyer who sees your advertisement.
All business owners want to sell their businesses for asking prices that will earn them a net profit. However, you must also consider other factors about your business. For example, how much debt does your business have? Is it currently making a profit? How much are its current assets worth? These are all considerations you need to make when pricing your business. If you truly want to attract buyers and sell your business quickly, then you should price it just a little bit lower than what it’s truly worth. Obviously, the lower the price, the more interest you’ll generate in the business. Start off by lowering the price about 15% from what it’s worth. If you don’t get any sales or suitable leads after a month or so, then lower it again another 10%.
Make sure your advertisements let buyers know what your business is worth. They might not know all the small financial details about your business to perform an accurate evaluation themselves. As the owner of the business, you should provide the correct market value of the company and have the financial documentation readily available to back up this value claim. That way, if a buyer wants to see proof of the value, then you can send it to them immediately and save time. On the other hand, if you’re in a situation where your business is not making any money and only losing money, then consider selling just the assets of the business rather than the business itself. Otherwise, no investor will want to purchase a company that is already losing money unless they truly feel like they can turn it around.
Related: Selling Assets vs Stock
Now you may feel compelled to just go to a business broker and have them handle all the marketing of your business sale for you. As an owner who wants to sell fast, you may find that business brokers work at a much slower pace than you would like. After all, they are handling the sale listings of multiple businesses, not just yours. Basically, what they do is list your business for sale on their website and possibly on other websites that they are affiliated with. After that, they just sit around and wait for a potential buyer to contact them through the ad. They don’t pursue any additional marketing efforts nor do they spend more money trying to get leads. That is why consistently listing your business for sale yourself on different websites will give you more positive results.
Depending on the current financial situation of your business, you may be reluctant to spend a lot of money toward your marketing. But just remember the more you spend toward advertising, the better chance you’ll have of selling your business fast. If the business-for-sale websites you use to advertise have special upgrades, like a featured listing option, then don’t be afraid to spend the extra money on that. You may even want to pursue Google AdWords and pay for clicks to your promotional page too.
Related: ExitAdviser's Go-to-Market Tool (works in conjunction with AdWords)
However, if you’ve tried all of this and you still have trouble selling your business, consider changing your selling options. In other words, try offering a seller financing option rather than expecting to get the full cash price. Most investors of small businesses don’t typically have a lot of cash on-hand anyway. A seller financing option would sure help them out considerably. Just be sure to screen the buyers carefully so that you know you’re getting someone who will likely honor the agreement and not destroy your company in the process. And if that’s not enough, consider selling your business to a friend, family member or employee of the company.
The Fourth P: Preparation
The first three P’s involve finding the right buyer. During this process, you must also keep your internal organization attractive and ready so that a prospective buyer will stay interested in closing the deal. This involves internal preparation of various aspects of the company. For starters, you want to have your business running in a way that allows the next owner to step in and fill your shoes smoothly. This means having employees who are currently running the company just fine without requiring your direction attention all the time. The easier you make the transition for the buyer to take over the company, the more confident they will feel in closing the deal.
You will likely be dealing with lots of potential buyers who are going to ask you the same questions repeatedly. Rather than let this waste a lot of your time, you should make a series of FAQ videos where you answer common questions on video about how your company works and what is required to manage it properly. Be sure to explain every aspect of your company’s operations, including the employees and what their roles are in running the organization. This will help buyers figure out exactly what they are getting themselves into so they will know how to run the company if they were to purchase it.
Now we’ve already talked about the importance of having financial documentation on hand to prove the value of the company to potential buyers. Well, you must also have documentation readily available about inventory, balance sheets, revenue reports, expense reports, tax returns, sales memorandum, supplier list and client list. As for the legal paperwork, you should have that already available for when you’re ready to proceed with the sale of the business. Since you want to sell the business quickly, the last thing you’ll want to worry about is having to spend days or weeks preparing legal paperwork for the buyer. Remember the longer you take to close the deal, the more likely the buyer will want to walk away. So, be sure to have available your letter of intent, business sale agreement, and non-disclosure agreement. If you’re using an online selling platform like ExitAdviser, then they should have the proper legal form templates available for you to use. That way, you don’t have to waste time and money in hiring a lawyer to do that for you.
Review Your Customers
Primarily, what is the one thing that potential buyers are going to be focused on the most when considering purchasing your business? The answer is its customers. Buyers are going to want to know what the company’s relationship is with their customers in the given market. Is your company satisfying the demands of its customers? Is your company consistently coming out with new services or products that entice customers and keep them loyal to your business? If you can show buyers a business model which illustrates these things, then it will only help you sell the company faster.
Another thing you need to make sure about is that you have multiple groups of customers and not just a select few. After all, if your company gets most of its business from just a few customers, what’s going to happen if those customers decide to walk away? The company will be in ruins if that happens. Buyers want to make sure they have a huge reserve of customers in case some of the customers decide to take a hike. That way, they can be sure to keep the money flowing in without jeopardizing the company.
If you have customers under long-term business contracts, this will be very attractive to potential buyers. These long-term contracts tell buyers that they are practically getting guaranteed business from these customers when they take over the company. However, if your company has little to no long-term contracts with customers, this will make buyers more nervous because they have no reassurance that customers will still be there after they purchase the business.
Lastly, you need to show buyers that your company’s customers are satisfied with the business that you’re doing with them and that they aren’t going to just walk away after their contracts are over. There are multiple ways you can prove their satisfaction to your buyers. For example, you can send out a survey in the mail or conduct a poll over the phone with your customers. Once the results come in, give a report of these results to your prospective buyers so they can see for themselves.
On a side note, you’ll want to try and remain discrete with the information about the identities of your customers. This applies to all documentation which makes references to the customers of your company. If you were to reveal this information to potential buyers, there would be nothing to stop them from just taking your customer information and starting their own company with it. Remember the whole reason why someone would want to purchase your business in the first place is because of the loyal customer base that you have established with it. If other buyers were to find out who these customers are beforehand, then they would just contact them directly and not purchase your company. So, you certainly must make sure that does not happen.
A video by TheBizSeller.com: How to sell a business - 3 mindsets to adopt so that you can sell it faster.
At this point, you should have a clear idea of how to sell your business quickly. It is not as easy as posting an advertisement up on one website and just waiting for a buyer to come. You must plan and strategize every aspect of the sale from beginning to end. In fact, most of the work that is required should be done before you even find a buyer. This involves preparing your documentation and ensuring that your employees are handling the operation of the company. That way, you can make the transition from one owner to the next as simple and easy as possible.
With all the company and legal documentation readily available, you won’t have to waste time preparing these documents after you’ve found a potential buyer. You can just provide them immediately to the first buyer who enquires about your company. This will make them decide faster if they want to proceed with the purchase or not. But after seeing how organized and professional you were in providing this documentation, they will surely get the sense that you were this organized and professional in running your company.
Do not be afraid to negotiate a lower price than your asking price. Sometimes qualified buyers who are truly interested in your company will try to bargain with you, especially if the company has certain debts or problems which lower its worth. Either way, deal with all potential buyers directly and never hire a business broker because they will just delay the process. If you follow all this advice, you should land a sale within a matter of couple of months.