Tips for Selling a Business Successfully
Selling a business is one of the most difficult decisions an owner will ever make. A business that they have spent years or decades building and have put their hearts into is hard to leave behind. The transaction itself can also be a lengthy process that many owners are not ready for. This is why it is important to prepare for the sale well ahead of time, so you have plenty of time to plan your exit and can negotiate the sale from a position of strength.
For many owners, their business is the most valuable asset they have. To ensure that the sale of the business is successful, there are some guidelines and best practices that should be followed. In addition to giving yourself plenty of time to prepare, here are four helpful tips to sell your business successfully:
Prepare your Financial Documents: Serious buyers will ask tough questions and do their due diligence. And if they see something in the numbers that does not seem right, it could scare them off. Before you put the business up for sale, gather your financial statements and tax returns for the past few years and review them with your accountant. Put together a report that includes all the information a buyer will look for in an easy to read format.
Upgrade your Equipment and Technology: Most realtors will tell you that one of the keys to selling a home successfully is ‘curb appeal.’ This is another way of saying the home needs to have an attractive look. This same principle applies to businesses. Buyers will shy away from a business that has old, outdated, and run-down equipment. The same applies to your technological systems; they need to be up-to-date in order to maintain a competitive edge. Dedicate whatever resources you can toward equipment and technology upgrades. This investment will almost certainly pay for itself.
Provide a Good Reason for Selling: Owners sell businesses for a number of reasons. Some of the most common include retirement, a forced move from the area, illness or death of a loved one, burnout, and boredom. Buyers are always concerned about why an owner is selling, and if you do not provide a logical reason, they are likely to think the worst. Explain your reasoning for the sale ahead of time in a way that buyers can understand. Otherwise, they may think you are hiding something.
Price your Business Appropriately: This is a big one. The price of your business can make or break the success of the sale. Price it too high, and your ideal buyer may not be interested. Price it too low, and you leave money on the table. Your tendency will be to price it too high, because you have so much of yourself invested in it. This is why it important to obtain a valuation from a third-party professional with in-depth knowledge of valuation methods and the current market for your type of business.
For many business owners, it makes sense to work with a reputable business broker. A business intermediary, particularly one that has experience with transactions in your industry, can help you properly value the business and show your rationale to buyers. They can also advertise the business confidentially to a wider network of prospects, putting you in a better position for a timely and successful sale.