Selling a business is rarely an easy decision to make, and there are a great deal of complexities involved in the process. You will often require a broker, accountant and legal professional to proceed with the transaction, and you'll need to take several important preliminary steps to prepare yourself. Selling up is certainly not a decision to take lightly, especially since there will no doubt be a great deal of money involved. For this reason, you'll also need to think about how you are going to invest the profits to provide future financial protection for you and any dependents you may have.
#1. Determine Why You Want to Sell
Sometimes, people are forced to sell up for reasons beyond their control. However, if you are lucky enough to have a choice, you'll need to evaluate the pros and cons of selling your business and determine whether it's worth it at this stage. Among the most common reasons for selling up are retirement, partnership disputes or illness or death of a major partner or even the business owner. Sometimes, however, it's just a matter of desire. Issues such as burnout, for example, are very common and legitimate reasons to sell, although selling up might not be the best option, particularly if it is done as a result of a rushed decision.
Related article: What is Your Motivation for Selling the Business
#2. Get Your Timing Right
You cannot expect to sell your business overnight for a decent price. Due to the complexities involved in handing the reigns over to someone else, you'll need to start preparing for sale well in advance, preferably at least a year in advance. It is also important to get your timing right so that you get the best return on investment. Markets fluctuate all the time, so you'll need to be in tune with the current trends in your industry so that you can advertise your business as a market leader that promises a satisfactory return on investment to anyone thinking of taking over the operation.
Related article: How to Get the Timing Right for a Business Sale
#3. Seek Professional Valuations
Valuations for real estate, such as commercial or residential premises, are complicated enough but, when you're selling a whole business, there are numerous other factors to take into account. For example, your annual turnover, how many customers you have, your online presence and even your mailing list all have an influence on the overall value of your business. In fact, it's highly likely that physical assets alone will only form a relatively small portion of your business's value. Due to the complexities involved in valuing a business, you'll almost certainly need to hire the services of a business appraiser to ensure you determine a credible asking price.
- Related Tool: Online Business Valuation Tool
- Related Service: ExitAdviser's Turn-key Business Valuation Service
- Related Articles: A Step-by-step Valuation Guide, 3 Methods for How to Value a Business
#4. Choose a Broker
Preparing a business for sale is a time-consuming job, so it often makes sense to hire a broker so that you can continue dedicating your time and effort to the continued operation of the business while it's on the market. Hiring a broker will also allow you to carry out the sale more discreetly, and you'll have a better chance of getting a good price. On the other hand, a broker will charge a hefty commission, although this will only be payable should a sale go through. Alternatively, you may want to consider selling the business yourself, particularly if it is a small company with few assets.
Find a Business Broker Near You
#5. Prepare Necessary Documents
Unsurprisingly, there's a fair amount of bureaucracy involved in selling a business of any size, so you'll want to start preparing the necessary documents far in advance. Firstly, you'll need to gather together any financial statements and tax returns from the last three years and go over them with a professional accountant to ensure all of the papers are in order. Other important pieces of paperwork include contracts for leased premises, proof of ownership of assets you own and any debts the business has. Be sure to create copies of these documents, since you'll need to present them to potential buyers, valuators and lenders.
#6. Find a Buyer
Once you've made all of the necessary preparations and are ready to put your business for sale on the market, it's largely just a matter of letting the brokers do their work. However, if you're selling on your own, you'll need to dedicate a lot of time to advertising your business and reaching out to potential buyers. Business sales typically take from six to 24 months, so you'll need to be patient. At the same time, you'll still need to keep the business running optimally, since you'll still be the boss. If business deteriorates during this time, you'll use a lot of money from any future sale, and you'll likely turn away otherwise serious buyers at the last minute.
Related: Go-to Market Tool
#7. Manage the Profits
While you're waiting for a sale to go through, you should start thinking about how you're going to manage the profits. Most importantly, you'll need to consider any tax obligations associated with accruing a large amount of wealth in one hit. For this reason, you'll be best off approaching a financial advisor who can help you to invest your money wisely while losing as little as possible to the taxman. You'll also need to focus on the long-term benefits of reinvesting your money in order to provide long-lasting financial security for you and your family.
- Find a Tax Adviser Near You
- Find a Financial Adviser Near You
- Tax Implications When Selling a Business
- Consult with the IRS: Sale of a Business
7 Tragic Mistakes Business Sellers Make
Check the video below: There are a few common mistakes frequently made by business sellers that can lead to a failed transaction or reduced sale price. Knowing these pitfalls in advance will increase your chances of achieving a successful sale.
Selling your business can be an emotional and stressful experience, particularly if you don't have a solid plan in place. To make the process go a lot smoother, you'll undoubtedly want to consult with various experts and make sure that any potential buyers are properly qualified. You'll need to be able to convince potential buyers that taking over your business presents a bright future, so you'll also need to be willing to change direction to keep your business relevant. Most importantly, you should never allow yourself to lose interest in the proper running of your business just because you are planning to sell it.
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