There are many reasons to sell your business. A very common reason is the fact that many owners simply want to retire after years and years of hard work, long hours, sacrifices, both professional and personal, financial hardship and so much more. Yes, some people buy businesses to sell sooner rather than later, but overall, a typical owner (or owners of course) will decide to sell and find that the decision is very hard, since the business is very close and dear to their heart. Selling your pride and joy is a truly emotional process, with trepidation written all over it.
The general rule, if there is such a thing, is to get someone to help you sell it It is very difficult and cumbersome to attempt to do it on your own (sounds a bit self serving, but it is true). There are plenty of moving parts. Some thoughts below to give you a feel for what might be expected:
Prepare your business for sale
- Before listing your business, take the time and make the effort to make sure it is in the best possible shape. Review the financial records, clean up any outstanding liabilities, and make necessary improvements to enhance its value. A well-prepared business is more attractive to potential buyers.
Determine the right time to sell
- Timing is crucial when selling a business. Consider market conditions, industry trends, and the overall performance of your business. Ideally, you decide to sell when profitability is high and growth is obvious. This definitely helps when setting the asking price.
Seek professional assistance:
- There is no doubt that procuring the services of a professional business broker or advisor who specializes in business sales will make all the difference. They can guide you through the selling process, help you determine a fair asking price, and market your business to potential buyers. Their expertise can be invaluable in navigating the complexities of selling a business.
Prepare comprehensive documentation
- A detailed and organized package of information about your business, including financial statements, tax records, leases, contracts, and any other relevant documents must be prepared. Providing thorough and accurate information to potential buyers builds trust and increases the likelihood of a successful sale The business accountant is crucial in this step.
Identifying the appropriate buyers
- Your business broker will do the homework as to who would be the ideal buyer interested in your business. This could be individuals, investors, or competitors. Marketing efforts are tailored to reach out to the right audience and highlight the unique aspects and potential of your business that would appeal to them.
Maintain confidentiality
- This issue is huge. Selling a business is a very sensitive matter. Everyone involved in the process, the business broker, the prospective buyers, the accountant for the business – must adhere to the utmost confidentially about the sale. Customers can be lost, employees can leave, and vendors can make untimely decisions on accounts payable. The damage to the business can be substantial. All prospective buyers must sign an NDA (Non Disclosure Agreement) to protect the business.
The asking price
- A key factor in the entire selling process. When setting up the asking price, there are established methods to come up with a logical asking price, and these methods always involved the history of financial performance. Annual cash flow or owners’ benefit drive the asking amount, with industry multiples used to guide the process, together with location, attractiveness or marketing demand for the product or service.A business broker is trained in the valuation process, and sometimes, depending on the size of the company, an outside professional business valuation service is used.
Negotiations
- What is your asking price? The price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of all relevant facts.Be prepared to negotiate the terms of the sale. Consider factors such as the purchase price, payment terms, transition period, and any contingencies. Stay open to compromise and be flexible during negotiations to reach a mutually beneficial agreement with the buyer.
Plan for the transition
- Develop a transition plan to ensure a smooth handover of the business to the new owner. This may involve training and mentoring the buyer, transferring customer relationships, and documenting key processes. A well-executed
Is there a cost associated with selling a business?
This excerpt is a direct quote from the Business Brokers of Florida website:
So for all the expertise, time saved and top sale price and terms attained, what does it cost to sell your business through an intermediary?
Typically, business intermediaries are paid a fee which is typically a percentage of the sale price. Many intermediaries will also ask for a small fee upfront. This helps partially offset their costs in business valuation, marketing and advertising while also showing your seriousness and commitment to move forward with a transaction. The upfront fee may or may not be credited to the final fee upon the sale. In most cases, the sale price that a business intermediary can negotiate for your business will be higher than what a sale-by-owner transaction would bring, even after taking their fee into account; this is due to their knowledge, expertise and by maximizing leverage in the negotiation process.
For many small business owners, the sale of their business is one of their most critical life events; that may only happen once in their lifetime. Having the assistance of a focused professional to manage and lead you through the process all the way to the closing table can make a huge difference in insuring the outcome is consistent with your goals. We hope that you will consider meeting with a business intermediary to discuss your specific company and goals. A good and reputable intermediary will never charge you to discuss your options. We hope that you have found this article helpful and informative.