Deciding to sell your small business and going through with it can be a daunting and complex venture. You will need to enlist professionals such as an accountant, a business attorney, and a sales broker. You need to keep in mind several considerations when embarking on the sale of your business, such as the strength of the business, the reasons you are selling, and the business structure. Here are six essential steps to selling your small business to ensure the sale is a profitable success.
Reason for the Sale
Some may wonder why the reason for the sale is important to the success of the sale of your business. You will need to participate in the sale and convince potential buyers that they will enjoy your business. If you identify your reason for the sale, you can first ensure you want to sell your business, and second, identify and adjust your attitude towards the sale as needed.
For example, if you are selling because you are retiring, there could be a family issue if you have family members who want it. Or, if you are selling because of partnership disputes, there could be legal issues when it comes to the sale of your portion of the business. Identifying the reason for the sale will determine how you proceed or if you truly want to proceed.
Timing of the Sale
If you are considering selling your business, you need to prepare for the sale as far ahead of time as you can. There can be areas of the business that need to be dealt with that could make or break a sale, so you can resolve the issues if you have plenty of preparation time. When it comes to the sale’s timing, certain times of year are better, just as with real estate sales.
Depending on your business type, the timing of the sale of your business could be important. Of course, if you are selling due to a sudden life change, you may not consider the timing or have a lot of time to prepare or ensure the market is good.
Business Appraisal
It will be vital that you determine the value of your business to sell it. To determine this, you will need to hire a business appraiser. The appraiser will consider several factors to ascertain the worth such as:
- Net profit
- Growth trends
- Website traffic (if significant to your business model)
- Age of business
- Online and offline sales network
- Business model
- Niche
- Competitors
- Company assets
Once the value is determined, the appraiser will explain the value in detail and certify it. This will help calculate the pricing of the business for the sale.
Hire a Broker
While selling your business on your own can save you money on commissions, hiring a broker specializing in business sales is a better idea regardless of the cost. Hiring a broker can help with the sale process while you focus on running the business. Hiring a broker can maximize the price of the sale by taking on advertising and negotiations.
Since there are costs involved beyond commissions when hiring a broker, you must keep great communication with the broker. Before the sale process begins, you should set expectations and a budget for advertising and other costs.
Preparing Documents
Some documents will be important to include in an information packet that potential buyers can review and know what is included and business operations. These documents will help the potential buyer determine if your business is something they want to purchase. This packet should include the following:
- Financial statements and tax records
- A list of equipment included in the sale
- A list of vendors, suppliers, and other essential contacts
- Operations Manual
- The latest business plan
- The latest budget
Finding a Buyer
Selling a business is generally not a quick venture, often taking anywhere from six months to two years to complete. The reason for this challenge is that finding the right buyer for the business can be difficult. If you have hired a business broker, they will be the expert on where and how to find your buyer. However, if you are taking on selling your business on your own, you need to make sure your ads include the following:
- The location of the business
- Number of employees
- A brief history of the business
- The mission statement of the business
- The geographic advantages of the business
- The net income of the business
- Contact information, social media handles, and the business website address
Once you have created your business-for-sale ad, several websites are dedicated to the sale of businesses. Investors are constantly using these sites to find new business ventures. If your small business is brick and mortar, you can go the traditional route and put a for sale sign in the window or front of the location and distribute flyers in the area.
You can also do some research online and find buyers looking to expand into your area. There is a multitude of avenues online you can take to find your buyer.
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