Selling your business can be one of the most exciting and rewarding decisions you'll ever make in your life, but it's not an easy process by any means. Whether you're an entrepreneur who has been trying to sell your business or if you're considering selling your business, there are several important factors to consider and questions to ask to get the right price and the correct terms. Here are the top five pieces of advice when considering selling your business.
To achieve maximum value, start ensuring all your systems and processes are up to date. The more modern the company, the more likely a buyer will pay top dollar. Also, get rid of lackluster inventory. You want to sell products that are moving quickly so your company appears as profitable as possible. If you have extra equipment or supplies on hand, get rid of those.
The best way to get a rough, realistic idea of how much your business is worth is by having an independent party provide you with a valuation. Business brokers can give an accurate valuation based on the size of your business.
Your security, staff, customers, suppliers, and vendors should be paramount. You may want to keep the sale among a select few until finalized or even make a conditional sale to protect yourself. The security of your business premises needs to be considered too. This can include keeping the staff in the dark about potential offers until they are made.
When you list your business for sale, you will need to have a lot of documentation paperwork prepared to prove its worth to potential buyers.
You will need to have your tax returns for at least the past three years and a profit and loss statement from the previous year. You should also prepare a projected profit and loss statement (also known as pro forma) based on past trends and industry averages. These documents will be used by an outside accountant who provides a valuation of your business, which you can use to determine how much you want to sell it.
After identifying the right target buyer, you should see four to ten serious buyers and two to three offers. This number is low because most prospective buyers cannot obtain financing or do not have the management skills necessary to run a business.
Everything about you and your business will change when you decide to sell. But even though it's an emotional process, there are some nuts-and-bolts issues to work out: How much do you want for your business? Who should be part of your team during due diligence? And what questions should buyers ask? Happy selling!