09 Feb 5 Things to Do to Sell Your Business
Selling a business is a complex venture that requires an intense amount of planning. This can become overwhelming when added to the daily challenges of keeping the business running successfully. However, there are a few areas an entrepreneur can focus on to secure a strong sale of their company.
Consider The Timing
When it comes to selling a business, timing can make an enormous difference in the price. As such, choosing the right time to sell is a critical decision that often includes many variables outside of the seller’s control. It’s true that selling a business when the market is hot can result in stronger returns, but it is not always possible to capitalize on that opportunity without proper preparation. Planning two years in advance and having an exit strategy ready for when the timing is right can ensure a much smoother transaction, along with a higher valuation.
Hire a Broker
Paying for the services of a broker to assist with the process can provide multiple, lucrative benefits by saving valuable time and reducing the stress. A broker will be able to solicit qualified buyers, advise their client and manage all of the paperwork. (Remember, selling a business of any size requires an exceptional volume of document chasing and organizing). Brokers will also act as a mediator between the buyer and seller, which is useful during negotiations. These professionals are well versed in the market, and will provide new and useful information to ensure the best return.
Get a Financial Evaluation
Determining the worth of a business will set a benchmark for future deals. There are several methods for valuing a business, and it is recommended to use more than one to help reduce the chance of a subjective value. Most methods will assess expenditures, tax strategies and cash flow to verify the business is operating optimally. To separate sentimental and tangible value, consider hiring an appraiser to value the business. Using a third party will also provide more legitimacy to the price, as the potential buyer knows there was a bias-free valuation.
Make Sure The Business is in Order
Not only is keeping the business in pristine condition a strong practice, but it will also increase the value of the company. Ease the minds of cautious buyers by carefully reviewing and organizing key business assets, contracts and processes. Having critical documents, information and processes in order will increase the value of a business and make the selling process easier.
Create a Growth Plan
Demonstrating a company’s potential to a buyer can move the deal in the right direction for the seller. Buyers want a business that is headed for success and a projection can show how much return they can expect on their purchase. Building and defining a realistic projected growth plan that encompasess the next three to five years of a business can help attain a higher price and lock in the sale. Strong growth plans typically include projected cash return analysis, profit reinvestment strategies, capital rounds and a detailed list of future expenses and income.
Due to the huge financial, emotional and time commitment, it is recommended to start planning the sale of a business years in advance. Working with a qualified attorney can help provide realistic, accurate valuations, while providing guidance to achieve the best outcome possible.