Do you own and manage a business? Did you reach a point where you’re looking to move in a different direction? Or did the ongoing pandemic force you to raise the proverbial white flag?
Though some businesses adapted to the challenges of the pandemic, many others struggle to stay afloat. Unfortunately, some owners have no other choice but to close shop.
However, selling your business is not as simple as you think. There are factors and considerations you need to go through as you sell your business.
Thus, before you pull the trigger, slow down, and take a step back. Continue reading below as we tell you what you need to know before putting your business for sale.
Understand Your Business Value
Before you finalize your decision to sell your business, you must first know your business value. This is the first major step that you cannot do away with. Otherwise, you may end up losing money that you should be able to enjoy, to begin with.
Your goal is to determine what prospective buyers are looking at. There are three types of approaches you can use when determining your business’ value. There are the asset approach, the income approach, and the market approach.
The asset approach involves adding all your business assets and liabilities. Thereafter, the number that you will arrive at will be your asset valuation.
As for the income approach, you will need to assess the net present value of your company’s income stream. And when it comes to the market approach, you need to analyze other companies – particularly your direct competitors – and see how much they are selling.
Answer the “Why?”
Another important aspect to consider before selling your business is knowing why you want to sell it in the first place. This step is essential since there will be many questions running in the minds of prospective buyers.
These buyers will ask you what your true reasons are behind the sale. And the way you respond to this question can be a deal-breaker.
As you try to formulate an answer, you want to focus on pitching the value of your business. Highlight the things that make your business appealing. And as you do so, be true to your answer.
If your reasons involve personal matters, be frank about it.
Fix Your Financials
Before you can sell and turn over your business, you need to get straight on your financials. This is where accurate bookkeeping comes into play.
Your financials will give buyers a summary of your company’s expenses. It will show them all your financial records, both standing and historical.
Your goal is to ensure that your financials are clean. This means categorizing your expenses and updating your payment records.
Also, buyers will look into your balance sheet and tax returns. They will also scrutinize your income statement. But regardless of what your documents say, you need to be transparent with the buyers.
Create a Selling Proposal
Aside from the financial statements, you also need to create a selling proposal. This document will be a detailed and thorough compilation of the reasons why buyers should consider acquiring your business.
Alternatively, you can use a video to sell your business. Regardless of the format you choose, make sure to include the essentials. Potential buyers should easily see the key details like your business’s geographic location; key financials, and an overview of your direct competitors.
You should also provide a breakdown of your operations. List the total number of employees, client portfolio, and the strengths and weaknesses of your company.
Also, don’t forget to include your complete contact information.
Timing Is Key
As much as you want to sell your business quickly, you still need to consider the timing of your sale. But when exactly is the perfect time to sell? The answer lies in how your industry and the economy are doing.
Proper timing can be tricky and some instances will tell you not to sell your business. Never sell when your business is facing a major turmoil. This will not place your business in a good light.
In turn, you may only get a measly payout from the sale.
Also, never sell if you feel burned out. Don’t let go of your company when you’re on an emotional low. Buyers will take advantage of your emotions and you’ll end up getting the short end of the stick.
On the flip side, sell when you’re ready for a drastic lifestyle change. Sell when your business is on an upswing. Sell when the economy looks bright.
Create an Exit Strategy
Selling your business doesn’t always mean taking your hands off of it the moment you close the deal. There is still a transition period as you transfer ownership and management.
Hence, create a solid exit strategy that will help you and the other stakeholders adjust accordingly. Will you be staying on during the transition period? If so, what will be your capacity in terms of decision-making?
Know the Brokers
Selling your company can be difficult. But with the help of a business broker, you can reduce the hassle and hasten the waiting time. Thus, talk to some of the best brokers in your industry.
These people will know how to find the right buyers. They also know how to negotiate for a good deal. They will also take care of the due diligence and help out with the documentation.
And if you want to know how to sell a technology business, some brokers can also help you out.
Mistakes to Avoid When Selling Your Business
Last but not least, there are crucial mistakes you need to avoid when selling your business online or otherwise. First is failing to plan ahead of time. Give yourself several months to plan and prepare your selling strategy.
Another mistake to avoid is asking too little or too much for your business. This is where the value of business valuation comes into play.
Also, never have the mindset that you don’t need to promote your business. Yes, you can easily hire a broker to peddle your business. But keep in mind that you know more about your business than the best broker in town.
Increase Your Business Knowledge
Now that you know the essentials in selling a business, you can prepare accordingly and avoid potential complications along the way. But if selling your business is not yet on the horizon, then you need to continue growing your business.
Read our other articles on business management. We discuss informative topics that will help bring your brand to the next frontier.