Selling Your Business?
Selling a business is the most popular exit strategy for business owners. In some cases, there are no successors who want to continue the business; in others, it was always the business owner's plan to convert the business into liquid assets at a certain point. Whatever the reason you want to sell yours, following these tips for selling a business will help ensure that you get your business sold.
1) Sell at the right time for the right reasons
The most common reason for selling a business is that a business owner falls ill or gets too old to continue to run it. This is the worst time to be selling a business. It's extremely difficult to deal with the additional stress of selling a business in those circumstances and it adds enormous pressure to sell quickly.
So don't wait until then. The right time is when you're still healthy and you have a successful business to sell.
What are the right reasons? Selling a business is very like selling a house in some respects. When you're selling a house, you don't say that you want to sell because the house is too small. You say that you want to move to be closer to work, for instance. When selling a business, you want to sell because you want to pursue a different opportunity or because you're seeking a different lifestyle (such as retirement).
2) Be clear about what you're selling
Before selling a business, you need to consider what all the assets of a business are and decide what you are selling. Determine what physical assets you are selling and what other assets you have to sell. Selling a business often includes assets such as good will, trademarks or client lists as well as physical assets. The value of these will depend on their quality.
If your business is incorporated, you also need to decide if you are going to sell your business as an asset sale (where you sell everything in the corporation but not the incorporated company itself) or a share sale (where you sell everything including your incorporated company).
3) Determine what your business is actually worth
Facetiously but truthfully, your business is worth as much as it will fetch in the marketplace. But determining just what that price is, is the trick. The value for a business is based o several different approaches ranging from asset-based to future earnings approaches. Of course, no one approach can be used in isolation; the current market, economic trends and what other similar businesses have sold for also need to be taken into account.
One of the biggest mistakes I see when owners decide to sell their business is asking for a price that is much higher than what the business is realistically worth. Although it may seem that by asking for a higher price, it will sell for more, the opposite is true. An over-priced business will not sell and if it becomes stale by being remaining for sale for a long time, it will sell for less than it should. It is important to price appropriately.
4) Make sure your house is in order
When you're selling your business, you need to be especially careful not to let things slide. In fact, this is the time that making the extra effort to keep things in tip-top shape. Think again of selling a house; like a house that's up for sale, you want your business to show well.
So whether you have any interest left in running the business, you need to make sure that you are keeping the business's records up to date (financial statements), the inventory up and the premises maintained. People want to buy thriving businesses, not neglected ones.
You'll also want to be sure that you've reduced your liabilities as much as possible, doing things such as settling any lawsuits and making sure all tax payments are up to date.
5) Get professional help when selling a business
Selling a business is an even more complex transaction than selling a house - and arguably, one that has even more emotional impact. Besides providing necessary expertise to guide you through the selling process, hiring a professional commercial realtor with experience in your type of business can help you maintain the emotional distance and objectivity you need to successfully sell your business.
Which professionals should you hire?
- As already mentioned, a professional valuator to provide an appraisal can determine what your business is worth. His or her valuation will be much more credible to a potential buyer than yours. And, a commercial realtor can be a real boon in terms of finding and dealing with prospective buyers of your business and helping you navigate the sales process.
- A knowledgable and qualified lawyer in commercial real estate can draw up and/or review the documents necessary to sell your business.
One Last Tip for Selling a Business
Selling a business is serious business, so you want to make sure you take the time and trouble to do it right. Careful preparation and using the professional resources available are the keys to getting as good a price as possible when selling and for a smooth transaction.
Sellers Please Note: An Agency Relationship Form and a Listing Agreement is required prior to your property/business can be marketed to our exclusive client base. It is essential that we can provide accurate information to our potential Buyers so that a sale can proceed quickly and effectively.