What to Do When Selling a Business
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When someone is ready to sell their small business, there is no question that it can be a complex and complicated process. There are also several considerations that must be made.
In some situations, hiring a broker (find details at CGK Business Sales) is necessary. An attorney may be needed too. If a business owner will earn a profit is going to depend on several factors, such as the reason the business is being sold, the timing of the sale, and the strength of the business’s structure and operations. Also, selling a business requires a lot of time and effort. Once the business is sold, the former owner or owners must figure out the proper way to handle the profit, too.
For those who are interested in selling and need some advice and guidance, keep reading. Here they can learn some helpful tips to ensure the sale of their business is successful and profitable.
Consider the Reasons for Selling
When someone decides to sell their business, they need to know the answer to the question -why? This is one of the first questions that a potential buyer is going to ask.
There are a few reasons a person may want to sell. Some of the most common include boredom, retirement, being overworked, death or illness, and partnership disputes.
There are many owners who sell their business when it is not earning a profit; however, this is something that can make it more difficult to attract potential buyers. It is a good idea to consider the ability of the business to sell, how ready it is to sell, and the timing. Some steps that a business owner can take to help ensure the business looks more attractive to possible buyers include increasing the profits, a contract that spans over several years, a strong base of customers, and consistent income numbers.
It is necessary to get ready for the sale of a business as early as possible. Usually, this means a year or even two before the sale will take place. This level of preparation will help a business to improve its financial records, customer base, and business structure, which will help make a business much more profitable in the long run. These types of improvements are also going to help ease the transition for the person buying the business and ensure it continues to run smoothly.
Consider the Value of the Business
The next step in this process is to figure out what the business is worth. Be sure that it is not priced too low or too high. It is a good idea to find a business appraiser to provide a valuation. The appraiser is going to create a detailed explanation that provides the worth of the business. This is the document that is going to offer credibility to the price that someone is asking -; it can also serve as a gauge for the listing price that is ultimately set.
Should a Broker be Hired?
When a business owner makes the decision to sell the business themselves, they can save money and avoid having to pay a commission to the broker. This is also the best route if a sale is going to be to a current employee or family member.
In other situations, brokers will help to free up a business owner’s time so they can keep things running smoothly. They can also help to keep the sale quiet to get the highest price possible. Remember, if a broker is hired, they are going to try to sell the business for as much as possible since the higher the price, the more commission they earn. Make sure to talk about advertisements and expectations with the broker, too, and stay in constant communication.
Prepare the Necessary Documents
Be sure to gather all tax returns and financial statements for the last three to four years. Go over these documents with an accountant. Also, it is a good idea to create a detailed list of all the equipment and other assets that are going to be sold along with the business. If needed, create a contact list that relates to sales transactions or supplies and make sure all other paperwork is accounted for, including the existing lease. It is best to make copies of these documents to give to any potential buyer.
The information packet created also needs to offer a summary that describes the way that business is handled on a day-to-day basis or even an operating manual. Be sure that the business is completely presentable. If there are certain areas of the business or the equipment that is used that are run down or broken, they should be replaced or fixed before selling.
Finding a Qualified Buyer
Sometimes, a business ale can take between six months up to two years. Finding a qualified buyer for the business is the most challenging part. Try to avoid limiting the advertising that is done. By doing this, it is possible to attract more possible buyers. Once there are several prospective buyers in place, make sure to keep the process moving forward by having several people interested, staying in constant communication with the buyers, and finding out if a buyer is pre-qualified for financing before providing information about the business.
Selling a Business
There is no question that selling a business, of any size and in any industry can be challenging. While this is true, the tips and information here should help ensure the process is successful. Being informed and knowing what to do and expect is the best way to ensure that the sale of the business has the highest chance of success. When necessary, work with the right professionals to ensure the desired results are achieved. By doing this, a business owner can feel confident they are getting the best price for their business, regardless of what the selling price ultimately is. By using these tips, any business owner will be on their way to a successful sale.