Thinking about selling your business? Emotional as it may be to sell what you’ve worked so hard on, there’s also a lot of practical things that go into selling something you built from the ground up. Even if you aren’t selling right now, there are things you want to keep in mind even now.
Most entrepreneurs aren’t thinking about selling the business they are getting off the ground, but whether you’re seriously thinking about selling your business or not, we’ve gathered the tips you will need when you begin thinking about it.
From the basic day to day tasks like keeping accurate records and making sure your employees can keep the company afloat without you, to picking the right time to sell, deciding what your business is worth, and finding a buyer. It’s never too early to begin seeing your business the way a potential buyer may look at it.
How To Sell Your Business
Perhaps the last thing you thought about back when you started your business, but nevertheless, things sometimes change, and what you didn’t think you’d consider is suddenly a viable option, like selling your business. But how do you go about doing that? Organizing a company for sale, getting a fair price, timing the sale, finding the right buyer, there’s a lot to think about. Successfully selling your business doesn’t start the day you decide you want to sell your business, you’ll get the best results when you keep your resale value in mind from the very start.
Keep Accurate Records
Even if you have no plans of selling your business, always think as if you do. Make sure that you keep accurate records for everything that goes on behind the scenes. Right now it might just be you, but a potential buyer may not be as interested if the records kept are less than stellar, keeping them from getting a good understanding of the profits and losses associated with your business.
Make sure that expenses are tracked and categorized, that bookkeeping records are well-organized to avoid this pitfall. Even the starting years matter, don’t miss out on a great sale years from now, simply because you didn’t bother with well-kept records.
Train New Employees Yourself
There’s a good chance whoever buys your company won’t replace all your employees, and that makes training your employees well even more important. Having employees that do a decent job when you’re keeping tabs on them is not enough. You need to make sure that every single one of the people that work for you know how to fulfill their responsibilities regardless of management.
Also make sure you document all employee-training documents, best practices, and other things new and current employees need to know. Train your employees yourself and make sure they are comfortable with every aspect of their job. After training, your employees should be able to carry on their duties and collaborate with other team members without needing input.
Understand What Your Business Is Worth
You need to know what is a reasonable bid amount for your business. It’s important to be realistic because you don’t want to have trouble selling by shooting too high, and you also don’t want to accidentally accept a lowball offer. Generally speaking, your business should be worth about 2-10 times it’s profit. An offer 3-5 times your business’ profit is considered a medium deal, and selling for 5-10 times your business’ profit is considered a large deal.
Pick The Right Time
How do you know when you are ready to sell your business? The main thing to look for is growth. Make sure that your business has a consistent month-over-month growth in revenue. You can also look at market indicators, or profit amounts, but although these are important too, consistent growth is the defining factor.
Find The Right Buyer
It can take a long time to find a buyer for your business, and an even longer time to find the right one. Advertise freely to attract several buyers. Don’t look for just one. Since there’s always a chance of things falling through, make sure you have at least 2-3 buyers lined up. You also want to make sure that a potential buyer pre-qualifies for financing before you give them any sort of information about your business.
Be Patient With The Sales Process
It may take as much as 6 months to two years to sell your business, don’t make hasty mistakes because you’re getting tired of waiting. Once you have a buyer make room for negotiations, but don’t be afraid to ask for what you believe your business is worth.
If you finance the sale you need to work with a lawyer or an accountant, or even both, as you come to an agreement with your buyer. Never forget to put any and all agreements in writing and to make any potential buyer sign a nondisclosure agreement to protect information about your business. Get the purchase agreement into escrow after it’s signed if you can.
Don’t Spend The Profits Immediately
Though it’s tempting to spend the profits from selling your business right away, it’s probably not the best idea. Instead, think about your financial goals, learn about taxes you may need to pay, and better yet, get advice from a financial professional to figure out how you want to invest your new wealth. Don’t forget to look at long-term goals such as retirement funding and getting out of debt.
The Bottom Line
There is a lot of time, decisions, and paperwork that goes into selling your business. Even if the sale itself is years in the future. Whether selling your business in the future is on your radar or not, it’s important to always look at your business through the eyes of a potential buyer. Do that from the very start, and a successful sale may very well be in your future!