Selling a home-based, or single-person business for a profitable price is a challenging task for the owners. With a large number Baby Boomer's reaching retiring age each year, and young generation of entrepreneurs buying business from them, the sale of small businesses are increasing every year. And this year is not going to be any different.
The strong growth of sell in home-based business is going to continue, as the interest rates are historically low for the past few years. For the owners who want to cash out or move on to a new venture this is the right time to sell. Demand is in the market for a low-risk / high-profit solo enterprises. So the approach from the business owner should be "be bought, not sold".
It is important for the business owners to be prepared for a buyer at any point of time in future. A detail blueprint is needed if you want to get the most out of your home-based business entity.
Related: What is Your Motivation for Selling the Business
Preparing your business for sale
A few things to consider before you sell your business:
Get your business valued by an independent evaluator: Whenever you want to sell your solo enterprise, always determine its value by a professional evaluator. Even though it is a small business, evaluating its value by an independent appraiser will bring credibility to the company and it is a strategic investment for the business.
Video: Russ Squire takes you through the 7 things you need to do in order to get the best price when selling your home based business.
Keep your financial documents accurate and updated: Buyers, who are prepared to pay a fair price for your business, will ask for detailed financial statements, purchase documents, tax returns and any relevant records concerning the business entity. So, get your books in order. Even hire an accountant if needed. These steps will ensure that you are ready to sell at any time.
Make sure you own the intellectual property of the business: Trademark the business name, logo, before you consider selling your business. Make sure the trademark, designs, software applications, engineering blueprints, domain names, any intellectual property exclusively belongs to you. This will add value to your business. A total professorial get-up will attract high-end buyers. It will be embarrassing if a business deal is halted because of a trademark or domain name issue.
Run your business without getting too involved: When you are ready to sell your business, make sure that your business is able to operate without you. If a single-person business is totally dependent on its current owner for smooth operation, then the business will be a hard sell. Potential buyers will be unwilling to purchase such business because there's no value without the current owner. Buyers have to be assured that, new staff and technology alone can run the business. A fully functional home-based business, regardless of the owner will get a higher selling price.
Transparency: Business owners will obviously want to show off the strength of the business, but a total transparency is important as well. If there is any lawsuit or environmental claim made against your company, be upfront about it. Tell the potential buyer at length about the uncomfortable issue. The Buyer is going to know about the situation any away, but hearing it from you will make a positive impact on a buyer’s mind.
Run the business as usual: Run the business as if you are not planning to sell it. As a home-based business owner, you are only selling you business, not going out of business. Always have a positive vibe about your sales proposal. Your business is a smoothly functional profitable one, but you want to try out new venture. This is the reason you are selling, not because you are exhausted with day-to-day business.
Acquire experience from other sellers: Gather knowledge from other sellers, who have experience selling their home-based business. They will give you real life experience, which you are not going to get from anywhere else.
Offer to stay with the business for a certain period: One major problem with home-based service businesses is that the whole business revolves around the existing owner. The current owner can offer to stay with the business for a certain period. This offer will lower the risks and thus add value to the selling price. Current owners can stay and ensure a smooth transition.
Don’t hire a broker, prefer a direct sale: As a home-based business owner, you don’t need to hire a broker. You are running a profitable business and with a few intelligent steps, you can promote your company direct to market. Start the selling process by having casual discussion with your professional contacts, acquaintances, customers, old employee, or even your friends. Next, there are online marketplaces such as BizQuest and even self-serve, low-budget business sale platforms such as ExitAdviser to market your business direct to potential buyers. You may want to hire a lawyer to prepare and close the deal, though.
Though you are a home-based business owner, view your business through the eyes of an investigating buyer. Do a neutral due diligence on your business to locate the potential weak points of the business and be ready with a solution.