For most entrepreneurs, selling a business is not as frequent an event as, for example, Richard Gere's character in the movie "Pretty Woman", a professional in the field. Without knowing and feeling the intricacies of the market for selling a business, many do not find a buyer, and if they do manage to sell their business, the proceeds are more likely to hurt their ego than to reward them decently.
Reasons to sell your business
Selling a business is a very delicate process, and it is better to entrust it to professionals who can justify a decent price, find an interested buyer, and avoid making many mistakes.
In this article we will help you to identify the signs that it is time to sell the business as soon as possible.
Related: 12 reasons to sell your business
Economic reasons for selling
- Lack of working capital is a chronic problem, as a result, the firm does not work at its full capacity and is progressively eating itself up.
- For a long time, the business gives less return than you can get without risking or straining. For example, by investing in this kind of business or buying gold from a gold dealer.
Organizational reasons
- Failure at selecting a well-performing team, the establishment of a decent management system, a payment system, etc.
- Failure at finding as well as closing the gap of the significant funds/information/customers leakage.
- The company fails in promoting the commodity effectively, competition, equipment renewal, and production variety.
- The sales system is vulnerable and weak.
- The company itself is in a downturn, losing ground and about to lose the market.
- Significant structural shifts in consumers (e.g., due to the crisis).
Psychological reasons:
- the business owner himself switches to a new business, busy with other problems that distract him from the business;
- in the character of the owner - dislike of routine, pedantic monotonous maintenance of the business.
Of course, it is impossible to list all the possible reasons, but in one way or another they indicate that the business is experiencing some limitations:
- in the management of the firm,
- in finances,
- in marketing and the external environment,
- in the organization of production.
Let's assume that you checked three or more reasons or limitations from the list above and decided to get rid of the business. What is the next question you should ask yourself?
Is it the right moment to sell your business now?
This is the first question the owner must answer. Is it a good time to sell? How will the business price change tomorrow?
If you recognize that there is a massive trend that threatens to kick you business out of the market - think about an exit plan.
If you look at the current market situation, it is clear that no business today can be completely safe. Former cab services, which not so long ago enjoyed tremendous success, are now left in the deep shadow of Uber. And many of the web dating services that used to exist have overnight become a relic.
It means if you want to stay in the game, you need to keep a good eye on the trends. But if you decide that's the time to quit the market?
Ask yourself: what steps can be taken to increase the value of the company? Are there necessary documents, references, such as an accounting report, expert evaluation of the company, market reviews, evidence of the position and reputation of the company being sold, and other attributes that may interest a potential buyer and affect the sale price? All of these questions are answered in our other guides.
When is the Right Time to Sell Your Business? | Freedom Factory
Why do people sell a ready-made business and is it worth buying?
Sale of existing businesses still causes mistrust among entrepreneurs.
The first reason to sell a business: relocation
The most common reason people sell a business is to relocate. Owners may move to another city or country. In megacities, the reason may even be a change of neighborhood.
Small businesses require constant monitoring and intervention. If there is no way to be around all the time, it is better to sell the business. Otherwise, there is a good chance that it will become unprofitable. How about hiring a manager? This is not always reliable. Selling a business is the best and most profitable option.
The second reason to sell a business: fatigue
The success of a business depends entirely on the entrepreneur: his approach to work, enthusiasm, skills and energy. A business can be compared to a child: the entrepreneur created it, raised it, put it on its feet, and made it successful.
The journey from creation to stable profits can be long and difficult. The entrepreneur may lose interest in the business or simply run out of energy. At the same time, the business itself is still successful and has good prospects for development. Fatigue is a serious reason to sell a business. A new owner will pick up the business and make it profitable.
The third reason to sell a ready-made business: reinvestment
Often one owner or company has a couple of projects that are developed in parallel. It is not always convenient and appropriate to engage in multiple businesses simultaneously.
In order for all areas to be profitable, you need time and resources. It may be unprofitable for a company to invest in all of its projects at once. Or there is a priority business that requires additional resources. Then what to do with the other direction? It is not reasonable to change the company's structure and reshape the budget. It is much easier to sell the non-core asset. It is still profitable and has good indicators.
The owner of the sale of a finished business kills two birds with one stone. First, it frees up time and energy to work with priority business. Secondly, it finds additional investments.
The fourth reason why sell the business: disagreements
Often a business is created by more than one owner. Often in the ascendant stage, when the case begins to make a profit between the co-founders there are conflicts: different views on the further development of the best and least painful way out of the situation - sell the business or share in it.
This technique is suitable not only for small businesses. If shareholders of a large company cannot reach a consensus, one of the parties sells its share.
Often businesses are created by married couples. Divorce or disagreement in the family is a common reason why a business is sold.
Have you decided to sell your business?
There are a few things to know so you don't make a mistake and lose money. These 5 tips will help you sell your business successfully and at maximum profit.
Before you start selling, you need to pay attention to the preparation process. Many people forget and take hasty actions that lead to losses. What it is worth doing.
1. Average market price
Take the time to put an exact price on your business without analyzing a similar market. What I mean by that?
You should determine the market value of your business by analyzing sales transactions of similar businesses. This will help you find out what the average market price of the business is.
2. Seasonality
When preparing to sell your business, keep in mind the anticipated timing of the sale. Think through this step in advance. In the winter or fall, the demand for a summer clothing store will not be as high as in the summer, right?
3. Price is key
By putting too high a price, you run the risk of not finding a buyer. Overpricing will scare them away. But, don't think that underpricing will help you sell your business quickly. Potential buyers will think there is something wrong with the business, there are some problems. For example, financial.
Price a little below market will help you make a quick deal. But you run the risk of losing a lot of money.
4. Specialists rush to help!
Do not hesitate to contact experts like business brokers and financial advisers in the field. It will save you a lot of time.
5. Gathering information is something you need to do in advance
Prepare the documents for your company. Make sure the financial part is in perfect condition, prepare all the necessary documents. Take inventory, do everything in advance. Preparing for the sale of a business can take a long time, eliminate all deficiencies during this period. Problems corrected in time will help better sell the business.
Prepare for the exit of your business
When you decide to sell your business, you need to familiarize the buyer with the value of your business, its strategies and policies. You need to know the exact value of its assets. You may need several appraisals, depending on the buyer, your business and the nature of the transaction. Properly prepared documents will help your buyer assess your business situation, its financial performance and possible problems.
Discuss some points...
Many entrepreneurs want to keep some employees in their jobs. Discuss this with the buyer of your business. You may also be asked to stay on and supervise for a while. Be prepared for this. Make sure you have all the basic details figured out, and there aren't any unexplained pitfalls that may make you uncomfortable.
When you are ready to sell the business, you need to think about how to get out of it. All possible buyers of your business can be divided into several categories. Each has different priorities and expectations. So understanding who you are selling your business to will help you plan the right way to sell your company.
