With today’s competition in the market, it makes sense that some entrepreneurs will think of selling their business. Whether you’re up for your next career challenge or you’re approaching retirement, finding buyers to assume responsibility for the business you’ve built could seem like a wise endeavor.
Even if you may know the best time to sell, it doesn’t mean the decision will be easy. You don’t only have to consider some important practical elements like impact on your employees, but also letting go of your business may involve emotional feelings, especially if you’ve worked hard to build.
However, selling your business can be a complicated process and may require the help of brokers. There are many reputable brokers, such as valhallabrokers.com, who can help you sell your business to the right person and get you the best deal for all of your hard work.
Alternatively, you may want to sell your business yourself, and there are DIY business-selling platforms like ExitAdviser that will guide you through the process. A self-serve approach saves you broker commissions; however, you need to spend more of your own time to make things happen.
Below are some of the things you should take into consideration before you decide to sell your business:
Know the Type of Buyer and Market Demand
If there are some businesses similar to yours that are currently for sale, there might be several interested buyers waiting to give you an offer. If there are many interested buyers, you would want to determine what kind of buyers they are so you may capitalize on their unique needs.
If buyers like to buy your business to expand their current business, expenses like bookkeeping might not increase much once they add another store.
For buyers who are purchasing your business to earn a living, they might not have to be informed that the cash flow you’ve been operating at would enable them to take home enough salary. So, if you want to put your business for sale, make sure to consider the needs of your prospective buyers.
Understand the Vulnerabilities
Every business faces operational vulnerabilities. But everyone looks at their businesses like new parents looking at their kids. It’s easy to be defensive and protective and it may be hard to be critical. Enabling yourself as well as your advisors to make some realistic evaluations would position the team better for successful sales.
See to it that you embrace your operational weakness. Other than the ones that are known, look for those who aren’t yet understood or discovered. Moreover, be aware of the contingent liabilities.
If it isn’t practical to get rid of the problem before the transaction, owning and acknowledging the problems before the buyers discover it enables you to make a plan on how to control and disclose the message to the buyers and cover your interests once the contract for buy-and-sell is created.
Define Your Priorities
One of the things to consider before deciding to sell your business is your priorities. It’s crucial that you go into the sale to know what you like to achieve, like the negotiable and non-negotiable terms such as the minimum price you want to get and cash-deal. If you don’t have your endgame in mind, you’re less likely to end up in the best position.
If you’re selling your business because you want to retire, it’s vital to have some realistic ideas of how much money you require for your retirement. You must also compare your proposed figure with how your business is worth and assess whether your plans aren’t impossible to achieve. This comparison will give you insights into how flexible you’ll be with the sale’s terms.
This may also help you come up with the list of what you like from the sale and the other priorities you want. If you interview business mergers or brokers or acquisition specialists, provide them a copy of your needs to know whether they agree with what you’re aiming to sell your business. You must also have your own copy of your priorities as the process of negotiation can be frustrating.
However, as with a lot of things in life, you’ll need to make compromises. It’s rare to meet the objectives of the sellers completely during the sale. More often than not, the saying “your price, my terms” is usually true. But, if you’re flexible with your terms, the closer you’ll realize your company’s top-dollar value.
Determine the Worth of Your Business
It might be easy to think that your business is valuable, but having a quick glance at all of its revenues won’t help you get the big picture. Having your business professionally assessed may help you determine how its liabilities and assets line up along with what your prospective buyers might want to pay. So, never hesitate to work with professionals with experience in selling businesses to lessen the risks and know the strategies to boost your company’s sale price.
It’s also important to review in detail your tax returns and ensure that they align with what you prefer in terms of business valuation. Your previous financial performance plays a crucial role to know what your business is worth. You also need to check if your debts from the past years might be paid off to lessen liabilities.
Don’t Be Too Emotional
Since most business owners have worked hard into building their business for years, it’s normal to experience emotional difficulties when deciding to sell your business. However, strong emotions may result in irrational decisions, and owners might price the business too high or could turn down a great offer after finding faults with interested sellers.
You also need to keep a distance from what you think the buyers might try to do. Everyone is in it for themselves and nobody’s purchasing a business just because of some philanthropic reasons. With this in mind, having advisors by your side may come in handy. Engaging experts such as estate planners, lawyers or accountants may help you make sound decisions without being too emotional throughout the selling process.
Take note that your business isn’t a person. Separating your emotions and being able to let go may be tough when selling your business, but it must not stand in the way of thorough planning and smart preparation.
There’s more that goes into selling your business than those listed things to consider. However, keeping them in mind throughout the process will help you make a well-informed decision for yourself and your business a well. Just make sure to work with a legal expert as you negotiate terms and walk through the deal step by step.