Selling your business is a big decision, and there are several things you need to consider before doing so.
1. Why are you selling?
There are many reasons that people decide to sell their businesses. Sometimes it’s because it is isn’t profitable, but usually there are other reasons involved. These can range from retirement age, to partnership issues, to boredom with the business to a death or illness in the family. Whatever the reason, it is important that you really examine your situation and consider how to place the business in the best possible light.
2. Is this the best time to sell?
The best time to sell is when your business is profitable and growing. It is much more difficult to sell a business that is losing money or breaking even, especially if it has been trending downwards in recent years. Additionally, you want to make sure that your financial records are all in order and everything is in tip top shape for the new buyer. It can take time to orchestrate all of this, so it’s best to start preparing for a sale far in advance before you are really ready to pull the trigger.
3. How much is it worth?
Of course everybody wants to know how much their business is worth before they decide whether they want to sell or not. To get the value of your business you can work with an experienced business appraiser and business broker. However, the final selling price of a business can vary depending on outside factors, so take any number that you hear with a grain of salt.
4. Should I use a broker or sell on my own?
Everybody wants to sell their business on their own to save on commissions. While this may be a good idea if you personally know a lot of people in the industry, or you are planning on selling to a family member or close friend, using a broker can provide a lot of benefits. They typically have a network of buyers and investors, as well as a marketing platform already set up. This can help you command a higher price, and probably sell quicker than putting it up for sale on your own. Having a third party involved can also help to keep things confidential.
5. What do I need to collect?
A potential buyer is going to want to see a lot of document before they purchase your business. These can range from tax returns, to financial statements, to point of sales reports and pay stubs. It is best to make sure that you have all of these collected and organized long before the buyer asks.
6. How long will it take to sell?
The average time to sell a business is between six and nine months, with some businesses taking years to sell. Finding the right buyer can be very challenging, so it’s important that everything looks good when qualified buyers do come through. If you are selling your business yourself, utilize every advertising medium that you can to get in front of as many buyers as possible. If you are using a broker, ask them what they are going to do to sell your business and make it stand out from the hundreds of other businesses for sale.
7. Should I offer seller financing?
Seller financing is another good way to demand a higher price for your business, and sell it quicker. If a buyer doesn’t have to go through the typical bank process, they may be able to buy your business when they couldn’t have before. Additionally, if you were just going to put the proceeds from the sale in the bank, you are now collecting interest on that money from the buyer. However, it can be risky if you don’t properly vet the buyer, or if your business is on the decline. If somebody comes in who doesn’t know how to properly run the type of business that you are selling, they might not be able to afford to make the debt payments on the loan. If that happens, you may be forced to take the company back, which many seller’s aren’t interested in doing.
As you can see, there are many factors to consider before putting your business up for sale. As with any major decision, take the time to evaluate everything carefully, and seek the appropriate professional counsel before pulling the trigger. You may find that there are options available that you had never even considered.