One of the possible reasons why a business owner is selling a business is low profit. Other common reasons include partnership disputes, retirement, boredom, overworking, illness, or death. But, of course, any negative reason may decrease your potential of landing a successful sale, so the first tip when selling a business is thinking of the best positive reason for doing so.
You would want to rather highlight that your business has long been getting a solid customer base, with consistent income figures or a successful major business contract with increasing profits. Check other helpful tips to sell your small business below.
Prepare As Early As You Can
You cannot just make an outright decision to sell your business next month or the next. The best preparation period is one to two years in advance. Why is this so? This amount of time can help you position your business in the best way possible, allowing you to do the following for a successful sale:
- Improve Your Business Financial Records: You want to collect receipts or invoices paid on time, all debts settled, and all data to be up-to-date in your book to give potential buyers peace of mind that your business is not a piece of lemon. In two years' time, you can establish a good financial record that you can proudly present to potential buyers, which increases your chance of selling your business at a higher price.
- Improve Your Business Structure: You can create a good organizational structure by organizing tasks by function, combining functions with almost similar tasks, creating a chain of command, and communicating the business structure to your employees. Doing so will help you present a smoother transition of your business from your management to the new one, which increases your chances of landing a successful sale.
- Improve Your Customer Base: Preparing early will help you strengthen your connections with your loyal customers, asking them to refer your business to their family and friends to help improve your customer base. With a good customer base, a potential business buyer will see a good reason to buy your small business.
Determine The Value Of Your Business
An annual appraisal is a good way to keep track of your business. You can set up an appointment with an accountant or appraiser to look over your business. They'll evaluate your business to find out how much you are worth, what your financial position is, and what the true worth of your business is.
Related: Business Valuation Calculator
Consider Hiring A Broker To Sell Your Business
While you can sell your business on your own to get away with paying a broker’s commission, there are many reasons for which you should use a broker to sell your business, which include the following:
- Expertise: A broker will be familiar with your specific needs and will give you advice as to how you can sell your business the best way possible. Brokers know who’s interested in your product and what kind of business you have to offer.
- Convenience: Brokers make it easy to handle the selling process, saving you so much time and effort.
- Get The Best Value: With a professional broker’s help, you can get the best value for your business because the broker can highlight the best qualities of your business that are appealing to potential buyers.
Addressing brokers and nearby advisors with the Pitch-to-Brokers tool
Keep The Sale Quiet
Selling your business may cause a panic mode to your clients and even your employees. That’s why it is best to keep your decision on your own until you have talked to a buyer and finalized the sale.
Consider The Competition In The Area
One of the most important factors to consider when selling your business is the competition that exists in your area. If there is less competition and you offer good products and services, a potential buyer may find a very good reason to buy your small business.
Look at what type of services you offer, how much of a profit margin you make, and your overhead costs. In each of these cases, you need to evaluate where you stand against your competitors. This is going to help you figure out the important factors to consider when selling your business that can drive a successful sale.
Prepare The Required Documents
Check these important things you have to prepare:
- Gather your tax returns and other financial statements at least three years from now, and review the data with an accountant.
- It is also essential to create a list of tools, devices, or equipment that come with the sale.
- Other relevant paperwork includes copies of your current lease. After the sale, you need to prepare the bill of sale, a document that transfers your business assets to the sure buyer. Also, you have to prepare a lease assignment and the security agreement, a document that shows the seller retaining a business lien.
Find Potential Buyers
Sell your small business to potentially sure buyers by targeting potential buyers, approaching parties in your niche or industry, casting a large net, and narrowing down your options to the best one who can make a good offer. You have to consider important variables, including the speed, the cost, and confidentiality.
Check the details of each approach below:
- Target Potential Buyers: Targeting one buyer at a time will increase confidentiality, keeping the sale from your employees, customers, and competitor. Also, it will allow you to save money on the commission or a business broker, and negotiate the transaction smoothly on your own. This approach may not maximize the selling price since there’s no competition.
- Approach Potential Buyers In Your Niche Or Industry: Having more potential buyers would mean a higher selling price for your business because there is competition. This technique can speed up the sales process. However, some companies may use this chance to fish or analyze your proprietary information, without any interest buying your business.
- Casting A Large Net: When you cast a large net of potential business buyers, it is possible to create an efficient business market with better terms and a higher price. This approach is used by experienced business brokers to maximize the selling price of a business for their clients. Confidentiality is safeguarded because initial contacts remain anonymous and only limited business info is transmitted. A non-disclosure agreement is signed by interested buyers in exchange for more information. The seller and the broker can choose the best candidates from the pool of the best candidates, and then ask them to make offers.
Set A Fair Asking Price
It can be overwhelming to increase the price of your business because of its sentimental value. You have invested your time, effort, money, and your heart to your business, which gives you pride and confidence. However, you don’t want to wait for so long just to find the right buyer, which may lose you more money in the long run. That’s why It's crucial to set a fair asking price.
Here’s how to set a fair asking price when selling your business:
- Conduct a market research as to how much a similar business cost based on existing businesses for sale.
- Determine the cost of your business by considering your profits, and equipment prices, among other things.
- You can ask recommendations from business experts, like a business analyst or an accountant. You can read helpful guides on how to best market and sell your business. It also pays off speaking with a lawyer to know your legal obligations before transferring a business to the new business owner to avoid future problems.
Create A Solid Marketing Plan
A very important step on how to find buyers for your business is to have a solid marketing plan in place. The marketing plan will consist of several different steps. The first step is to build a list of potential buyers. This list can consist of those people who have visited your business or are in the process of looking for a new business to offer their services or products.
Take a look at the following tips when creating a marketing plan to sell your business:
- Talk to industry leaders or organizations and find out if they know somebody who might be interested in buying your business.
- Set clear goals to ensure you’re not losing more money while waiting for good buyers. Timing is vital. You have to determine what offer to accept and when to accept it.
Repair And Replace
Renovating your business establishment can help improve the aesthetic appeal of your business. Fix all broken or damaged machines, like computers, fax machines, and fixtures. You want to present your business in the best way possible to attract more potential buyers who can make better offers when you decide to sell your business.
There are a lot of factors to consider and steps to make when selling your business. You have to prepare your business early to improve your financial records and customer base, among other things. Also, you have to prepare the required documents for a faster sales process and find potential buyers applying the approaches discussed above.
About the author: David Miller has been working as a blogger for years and has gained the loyalty of readers worldwide. David regularly publishes business-related content on his blog and submits guest posts to other websites, as well.