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Selling Your Business Checklist – A Must-Know!

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.

Janet

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.

Like most aspects of business (and life!), selling your company will be easier and less frustrating when you create a plan.Click To Tweet

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.

Final Thoughts

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.

Photo by SergeyNivens / DepositPhotos

 

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Maria has been writing articles for 5 years. She specializes in business and marketing. On her free time she loves to read and write about her travel experiences. You can find her doing this by the beach.

Gravatar mystery man

Maria has been writing articles for 5 years. She specializes in business and marketing. On her free time she loves to read and write about her travel experiences. You can find her doing this by the beach.

10 Comments

  1. Avatar Seana Turner on August 28, 2019 at 12:38 pm

    I’m not in the market to do this now, but this is very helpful information. I know many entrepreneurs look to sell, and it can seem overwhelming! Thanks for sharing. Nice to “meet” you, Marcia, here on Janet’s site.

    • Avatar Janet Barclay on August 29, 2019 at 12:59 pm

      It’s definitely worth having it in mind. A lot of sole proprietors just shut down their business when they retire, but if you have a good infrastructure and client base, selling it to someone else could be a win for you, them, and your clients!

  2. Avatar Judith Kolberg on August 29, 2019 at 10:46 am

    I am close to being ‘on the other side of the mountain’ career-wise and this is so helpful. When I get closer to sliding down into something resembling retirement, I’ll turn to Marcia for more help. Thanks Janet for always keeping your blog relevant.

    • Avatar Janet Barclay on August 29, 2019 at 1:00 pm

      Thanks for your kind words, Judith! Lots to consider as we approach “that age” – at least we have more options than our friends in traditional employment!

  3. Avatar Linda Samuels on September 9, 2019 at 9:21 am

    One of the points I found most interesting was “keeping the sale secret” for as long as possible. I understand the reasons. One thing I’ve noticed in the organizing industry is when colleagues are selling their businesses, they made a big announcement about their intent to our industry. I’m guessing that’s because current colleagues were their best target clients for the sale. Any thoughts about that aspect?

    Also very happy to hear that Judith is still scaling the mountain. She’s one of the industry treasures that I hope will contributing and hanging around with us for a very long time.

    • Avatar Janet Barclay on September 9, 2019 at 9:22 am

      Hopefully Maria can respond to your question.

      I’m at the age where many of my former co-workers and friends are retiring. It seems that most of us who have followed our own paths are happy to continue working for longer!

  4. Avatar Sabrina Quairoli on September 9, 2019 at 10:47 am

    I looked into doing this when I had a back injury and couldn’t do the physical organizing part of the business any longer. It’s nice to know that a business broker is available to assist business owners. Thanks.

    • Avatar Janet Barclay on September 9, 2019 at 9:22 am

      I’ve always thought of business brokers being just for larger companies, but it makes sense that if your business is large enough to be sellable, it’s large enough to bring in the pros!

  5. Avatar Janet Schiesl on September 10, 2019 at 7:24 am

    Great advice. My far reaching goal is to sell my business. This is good information to have. It takes years to prep to sell and you need to start earlier than most people think for the best outcome.

    • Avatar Janet Barclay on September 10, 2019 at 1:24 pm

      It’s very different than selling a house, where you can fix it up just before putting it up for sale. I imagine that someone buying a business is going to want to know how it has performed over time, not just recently.

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