For small business owners like you, selling a business can be an overwhelming experience. This is especially true if you have never been into this process previously. From the logistics to the timing of the sale, there are plenty of considerations to make before you should proceed. And while you may struggle with this concept considering it is something that you have built from scratch, selling business can also be very rewarding. The profits you can realize from the sale can allow you to have the financial freedom in the long run.
So, if you are planning to sell your small business, below are some tips to consider from the get-go:
Know What Your Business Is Worth
Whether it is a small business, it is usually worth more than its profits which is 1-10 times profit. But, if you want to ensure if you are selling your business for its right value, then it is best to hire a valuation expert who can provide you with an accurate and realistic estimate of your business’ worth. They can give you a detailed report by giving out appraisals and doing research on the marketing conditions of your business. It is wise to hire an expert business appraiser if you think that the process is very complex and time-consuming.
However, if you prefer not to hire a business appraiser, you can consider three ways of business valuation. These can include cost approach, intrinsic value approach, and the market approach. All of these ways may help you find out the value of your small business.
Related: Business Valuation Methods
Get Your Business Finances In Order
Selling a business is not just a simple undertaking as it talks about profits and your financial freedom as well. Thus, it is essential that you get your finances in order so you will have higher chances of getting your small company sold.
To get started, find time to prepare your profit and loss statement, balance sheets, cash flow statements, and the last three years of tax returns. If you think you need professional help, you can hire accountants and CPAs to do the job for you. This is to ensure your business finances will not be a red flag for your potential buyers. If you were using an accounting software or app in managing your business financial transactions, you might be able to access a tool that records all the financial activity within your business. Make sure to compile this and print out all financial transactions and reports.
Work With A Business Broker
When selling a small business, you can either have it sold on your own or use a broker to expedite the sale. Generally, you can sell it on your own if your prospective buyer is a family member or anyone whom you trust in your life. By doing this, you are able to save some money on the brokerage fees.
However, due to a wide range of circumstances, hiring a broker can be your ideal option. Using their knowledge and expertise, you are able to sell your business at the best possible price which is good for your situation, especially if you plan on running the business while waiting for a closed deal. Since it is their main responsibility to sell business, there is a much better chance for a closed deal in less time.
Video: Pitch-to-Brokers Tool
Find The Potential Buyers
Of course, you can’t sell your business without prospective buyers in place. Thus, to push through with the sale, you need to find these people who are willing to pay a reasonable amount of money to buy your small business. This person can be your competitor or anyone.
However, aside from your competitors, there can be different types of buyers to consider in this process. These can include:
Private equity groups
As you can see, there is a need to know which type of buyer will purchase your business so you will get an idea of how long it takes to process the transaction. Make sure you qualify a potential buyer for your business so you won’t waste investing your time and information about your business. But regardless of the type of buyer you will deal with, make sure that you do not rush the acceptance of an offer right away as you can use it to maximize the value of your business. Be prepared that your potential buyers will likely have to negotiate for the lowest possible price. So you should definitely know your target price or walk away price. Make sure that you have a market data to back up why you believe that your price is reasonable.
Finalize The Deal
Once you find the right buyer of your small business, the next step is to finalize the deal by preparing the legal documents and contracts. Since this process can get a little messy, you should be very careful in doing so to avoid problems later on. Generally, the standard legal documents and contracts involved in a business sale can include the bill of sale, purchase agreement, asset listings, noncompete agreements, security agreement, and many more. Keep in mind local and state laws which should regulate the sale of business within its jurisdiction.
For example, if you are selling your small moving company New York City or wherever you may be, anytime soon, then you need to prepare an inventory of all your moving tools and equipment. This is to ensure you will not miss anything once you turn over all your business possessions to the new owner.
Turn Over All The Business Belongings
Once all the legal documents are in place, then you are ready to turn over all the essential business belongings to the buyer. These items can include office furniture, paper files, drawers, computers, and other pieces of electronics. If you are moving your own business, try packing items that will not be used on a regular basis.
However, if you have personal possessions that need to be transported to another place, you may want to consider hiring professional movers to help accommodate all of your things. They have the necessary skills and expertise that can make the move more seamless and safer.
If you are ready to sell your small business, be sure not to complicate things by following the tips mentioned above. While the process takes a lot of time and energy, you can make the most out of the sale if you set realistic expectations when it comes to the price and the timeframe.