Selling Your Business Checklist – A Must-Know!
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I know a few people who have sold their businesses when they were ready to move on to life’s next adventure, whether it be retirement, a different type of business, or an employment opportunity they just couldn’t pass up. Since I have no experience or knowledge of this process, I was pleased when Maria Macaraig offered to share her Business Selling Checklist.
Congratulations! You’ve decided to sell your business. No matter what the reason is, selling a company is always a step forward and an opportunity for personal growth.
Selling a business is a tough task, which can be simplified by creating a plan. When you know which steps to take, the sale may turn into a walk in the park. Or at least a process that doesn’t take up all of your time or stress your nervous system.
To help you sell your company quicker, we’ve come up with a checklist to assist with your planning. These points are bound to make the process easier and less frustrating.
1. Determine the Value of the Company
Before you go any further, you have to figure out how much the company costs. Even though on average, small business costs about four times its annual cash flow, the market fluctuations and country economics could affect the price.
Determining your business’s market value could be complicated for someone who is busy with other matters. That’s why the majority of owners hire business brokers or other assistants to evaluate the reasonable cost.
However, even without assistance, you can get a general idea of how much your company is worth based on its assets and cash flow.
2. Clean up Your Act
Before you put your business up for sale, you have to make sure everything is in order. Look through your financial documents, pay off immediate debts, improve your financial records if possible, beef up the relationship with clients, and the like.
Just as with selling a home, when you are selling a business, it should have an excellent curb appeal. Many buyers are ready to dig a little deeper to find out what they are investing in. You have to be able to provide all the necessary documents, which must be in good shape.
Get together your financial statements and tax returns from at least three years back and show them to an experienced accountant. You may find plenty of points to fix.
3. Hire a Business Broker
This step is optional. However, it could be a big help to business owners, who aren’t ready to dedicate the majority of their time to selling a company. According to an Orlando-based business broker, many business owners, who try to sell the company on their own, eventually, turn to brokers for assistance.
A business broker can evaluate your business, find qualified buyers, come up with effective marketing materials, act as a buffer between the seller and the buyer, help with negotiations, draft agreements, give valuable advice, and much more.
Business brokers usually take about 10% of the deal value as their fee. You have to understand whether you are ready to pay that much for the above-mentioned assistance.
4. Find a Buyer
Even if you delegate the search for a buyer to the business broker, you should still participate in the process. Remember, selling a business is not like selling a home. The process may take more than a year.
Here are a few things to remember when looking for a buyer:
- Don’t stop when you find a potential buyer. Just because you found one, it doesn’t mean the deal will go through. Settle on two or three potential buyers to work with.
- Always stay in contact with potential buyers. Make yourself available for any questions.
- Find out if the buyer pre-qualifies for financing before revealing financial information about your business.
- Allow negotiations but never go below a price, which is reasonable for you and the current market.
When it comes to potential buyers, trust your intuition. If something doesn’t feel right, consider another candidate.
Don’t follow the “first buyer is the best” rule. It doesn’t work with businesses. Of course, you shouldn’t refuse the buyer without a reason. But settling for a lower price just because you want to sell a company faster isn’t always the answer.
5. Invest in Promotion
Selling a business without proper marketing efforts is nearly impossible. Here are a few simple steps to begin your marketing campaign with.
- Identify your potential buyer – find out who your target audience is. Determine the profile of your buyer. Is it a local buyer? Another company? An individual?
- Find your potential buyer – where do your potential buyers go? Which websites do they visit? Which newspapers do they read? Use this information to place your advertising materials.
- Contact your buyers – you can contact potential buyers directly if you know which individuals or companies in your area are looking to make a purchase.
If you hire a business broker, you can take this load off your shoulders. It’s a broker’s responsibility to advertise your business. In fact, these specialists can do it much better since they have a buyers’ database to work with.
6. Keep it Confidential
When you decide to sell a business, it’s vital to keep the sale confidential. Of course, you would need assistance from your trusted advisors to make the sale possible. However, telling your employees is not necessary. In fact, such information could lead to a disaster. People could start looking for new jobs, making your “curb appeal” much less appealing.
Meanwhile, if your customers learn that you are selling your business, they may turn to competitors, thus lowering the value of your company. Keep the sale a secret for as long as possible.
7. Set a Deadline
Once you find a potential buyer and start negotiations, it’s important to have a strict deadline. Otherwise, the process may take months without ending with a deal. During that time, you lose an opportunity to find new buyers.
When negotiating a deal, put yourself in your buyers’ shoes to understand what is important to them and how much they are willing to budge. How do factors important to them compared to factors important to you?
Ideally, you should have an experienced advisor helping you go through the negotiation process.
The above checklist can help you sell a business faster. It’s important to understand that selling a company takes time and money. Don’t rush into a deal unless you are 100% sure it’s the right thing to do.
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