You have a small inkling, then a feeling, then a growing wish to sell your business. You feel the time is right, perhaps for your own personal reasons or maybe because of the market. The motivation is there and the drive to sell is strong. You might be ready to sell your business, but is your business itself set up for sale?
There’s no question about it: you don’t want to start the sale process unprepared. You know what’s at stake here. No one wants to invest years of their life in building a business, only to sell it for a less-than-ideal amount. Yet business owners skip important steps all the time in a rush to sell their business and move on to the next thing (or to retire). Don’t let that happen to you! In our latest article, we explain five tasks you should complete before sitting down at the negotiation table.
Are You Ready To Sell Your Business?
You have invested years of your life into starting and growing your business. Now you want to sell. Maybe it’s time to retire, or maybe you’re ready to move on to another field. Whatever your motivation is for selling your business, you first need to be prepared for the technical aspects of a sale.
We’ve come up with five items you can check off your list to make sure your business is ready for sale.
You’re confident that your business has clear, cohesive branding.
Looks matter when it comes to how a business is perceived. A business without a strong brand automatically inspires less trust than a business with clear and cohesive branding. Your business must have a polished logo that appears consistently on all your branding materials.
If your business has a brick and mortar location, then it’s essential that the location is pristinely clean and embodies your brand identity.
Buyers don’t want to invest in a business where they have to come in and fix the branding. There’s something to be said for knowing your brand identity and implementing it across the board.
You have established a strong system and a clear post-sale management structure.
When a buyer is considering a business, they’re going to take the time to find out just how well both the day-to-day and big picture operations are run. If the business can’t function without you and your specialized knowledge, then that’s not a good sign. Buyers want to invest in businesses that are, for the most part, fully self-functioning. Good systems for each part of the business are in place.
One part of a good system is having a solid plan for the future. You need to have a plan in place for who, ideally, will remain in their positions and who will change roles after a sale. It’s important to have this post-sale management structure set before any negotiations begin so that potential buyers see that you are prepared – and therefore, that your business is well-run.
The financial state of your business is solid.
You need to make sure you have a firm grip on your own numbers before you start the sale process. It’s essential that you know if you have any outstanding debts or unpaid taxes. You should also have a thorough understanding of your profit and loss sheet. That way, you can explain just how your business weathers bad times and does well during good times.
This is also important because you must be able to prove that your business can operate without investor funding. If you’re still relying on investor funding, then this is a good sign that your business is not ready for sale yet. It signals to the buyer that the business is not yet self-sustaining and is not, perhaps, the best business model. Remember that investor funding cannot always be relied upon, so if you’re still counting on it, this will make your business a tough sell.
You have invested in a business appraisal.
When you purchase a house, you pay to have it inspected first. When you’re getting ready to sell your business, you pay to have it appraised first. This is an important task that can’t be skipped. You need to have an idea of what a third-party valuation of your business is before you go into any negotiations. Without an appraisal, you’re entering into negotiations blind.
You have assembled a knowledgeable team of professionals for the sale.
Before you sit down at that negotiation table, you need to be confident that you have the best team at your side. You’ve done all the work to prepare your business for sale, and now it’s time to nail down the specifics of the sale. You don’t want to try to make all these decisions on your own.
It’s a smart idea to have a CPA, an attorney, a business broker, and possibly a financial adviser at your side when you enter into negotiations. While you’re the expert on your business, these professionals are the experts in their areas, and they know what to look for to make sure you’re getting the best deal that you can.
The decision to sell your business is one of the most important decisions you’ll make in your life. Don’t enter into the process unaware. Make sure your business branding is strong, you have solid systems in place, your financial situation is solid, you’ve invested in an appraisal, and you have a great team by your side. Following these steps will help you get the best deal when it’s time to sell.