Selling a business may sound easy. But it's far away from reality, particularly in today's economically strained times.
You know, building up a business takes immense effort. Similarly, selling it demands heaps of input. Unless, of course, you have no concerns with the profits. But that is highly unlikely. So, if the generated amount is a considerable concern for you, then you ought to go about it in a rather planned manner.
Along the same lines, we present you with a complete guide in the same regard. Beginning from the root cause of selling to yielding and acquiring the maximum possible profits - here you will find a lead about selling your business in 2021.
Reconsider: Should you or should you not?
Hold up. Before we get to the gist, let us clarify if we even need to get there.
Why are you selling your business? What became the motivation of this decision? Is it because a recent downfall corrupted your spirit? Perhaps, an urgent and unfortunate financial need knocked on your door? Or maybe you intended to do it all along?
Rationally, it is almost impossible for us to determine what became your motivation. Only you can answer that honestly and genuinely. But our advice, in this case, would be to get it all sorted in your head and physical circumstances. Make sure that you know what you are doing. Otherwise, you may end up regretting quite a lot.
To help you out with that, let us sketch some aspects for you. Selling your business might be a good idea if you consciously wish to lead a different lifestyle or wish to invest your time elsewhere. If there's a lock in your profits or if the losses are messing up with your mental and physical health and your team, as well as circumstances that have become non-supportive, then quitting might be a good idea.
However, if you have come a long way and a recent quandary is making things difficult for you, then all you might need is nothing but a break. Allow yourself to breathe and dive right back in. Nothing is impossible, you know. With ample effort, you can fix back all that is lost.
Nevertheless, if you have taken your decision, it's time to execute it the right way. If you will be selling your business anyway, let us do it procedurally for maximum profits.
Determine Your Business’s Worth
For your first step, you ought to evaluate the current status of your business in the market. It depends on the investments that you’ve made over time as well as the general output that your business gives, i.e., the profit.
Usually, businesses get sold at 2-10 times the profit that it generates. There are categories in terms of deals, which include:
- Small deals (Under $3 Million)
- Medium deals (Ranging between $3 Million - $20 Million)
- Large deals ($20 Million or above)
The smaller deals will be including 2-3 times profit while medium ones will include 3-5 times profit. Grand deals will be inclusive of 5-10 times the profit. Abiding by these standards, you need to determine where your business falls best. And hence, plan accordingly.
Relate: How to Value a Business
Collaborate with a Professional
Once you have your very personal estimates, it’s time to seek some professional help. You can get in touch with a broker and investment banker. Or say, a financial advisor. They will evaluate the current financial status of your business in terms of debts, assets, sales, etc. Plus, they may even evaluate the current running costs inclusive of basic business expenditures, as well as support costs, such as the online reputation management costs.
And following this detailed evaluation, they will propose a more realistic price. You will need this proposed figure for the decisions that you will be making in the near future. It could let you know whether you have to up your business game to maximize profits or you can acquire maximum profits through any other way.
Collaborating with a professional was perhaps step one towards proving that your business will stand its ground. Almost any buyer at all will prioritize this very factor. In actuality, they may neglect all the factors, save this one. Nobody would want to invest in something that wouldn’t last.
Hence, once you have the evaluated figure, arrange another seating with your accountant or financial advisor and dive into details. Determine the assets you have onboard and decide which of these do you wish to sell. Also, determine if selling these separately would bring you greater profits or a collective sale would.
Next, demonstrate the viability of your business to your potential buyers. Arrange all your documents thoroughly and explain the mechanism of your business to the buyer. You need to offer maximum transparency. Certainly, mentioning faults and flaws count, but we will advise you to try eradicating those flaws to maximize profits. Such a practice will not only bring your better buyers but will also save you from future headaches.
Level Up Your Business Game
When purchasing your business, the most important factor to the clients is sales generation. Nobody will invest in a business with poor performing stats and irregular revenue streams.
Your business should have a steady and healthy money source to remain attractive to the customers. Also, it increases your profit margin at the time of purchase. Asking for a larger price for a striving business appears more justified than for a declining one.
Usually, business purchasers consider companies and organizations that have been experiencing 30-percent sales increase over successive two to three years. It is evidence of the company’s thriving position in the market and profitability.
Picky business purchasers will inquire about financial status in detail. They will ask for any contracts already in place and their transferability. These people might also conduct an analysis to identify revenue potential for surety.
However, note, your business should not have few customers. Even if those fewer customers are bringing large revenues for your company, the deal might not sound appealing to the client.
It is fundamentally because losing only one of those customers can cause prominent damage to the company in the future. Hence, ensure the client base of your company is large and attractive.
Let Potential Buyers Knock & Wait
Once you have completed everything, do not hurry in finalizing the deal. Wait for the business sale deal to reach all the potential customers.
Let everyone consider the deal so that you can get the best possible price. There is no benefit in not exploring other options!