What Do I Need To Consider Before Selling My Business?
It can be difficult to choose the perfect time to sell a business. There are so many factors to consider and obstacles one must overcome. That, coupled with the fact that businesses have seemingly infinite lifespans, means that one must plan and execute their decision very carefully in order to avoid regret or failure.
That’s why we’ve put together this post all about what you need to consider before selling your company — from financing options to metrics for success.
We hope it helps you get your business in the best shape to sell for the most money possible.
Selling Your Company: A Step-By-Step Guide
In order to sell a business, there are numerous steps you will need to take. This process can be long and arduous, so we recommend putting together a timeline and sticking to it. Here’s our step by step overview of the process (which is also laid out in much more detail further down in this post):
Stage 1: Prepare Pre-Sale for Sale of Business for the Long Term: You should have clear goals in mind about what you want from the sale of your company. An exit strategy is just that. You’re not just looking to sell it ASAP if an offer comes up – you should have an exit strategy that you know will earn you a profit. You need to spend time here developing this plan, so that you are able to make the right decisions so as to obtain the most money possible for your company.
Stage 2: Begin to Generate a Pipeline of Potential Buyers: In order to sell your company, you need to begin generating interest. This means that you need to be putting out the word about what a great opportunity your company is and how attractive it is to potential buyers.
Stage 3: Identify the Right Suitor for Your Company: It’s important that you get an understanding of who is interested in buying your business. This can be done by reaching out to your network and gathering introductions with potential buyers with whom you may have a relationship or similar interests. It’s also important that you remain open-minded and don’t dismiss a potential buyer just because they are not the right fit right now or your gut instinct tells you otherwise.
Stage 4: Negotiate with Potential Buyers: If you do decide to engage in negotiations with a potential buyer, be sure to negotiate from a position of strength. This means that you should understand what your company is valued at, how much money it could make for the new owner, and how much of this value you want to keep for yourself.
Stage 5: Determine a Buyer and Close on the Transaction: This is where you come to terms with the buyer, draft your agreement, create an escrow arrangement (if necessary), sign contracts, and so on.
Selling Your Company For The Most Money Possible: Considerations When Selling Your Business
1) Determine What A Business Is Worth Before You Sell It
Before you can decide what your company is worth and thus how much of a profit you should get from the sale of the business, you need to determine what it’s currently worth. To do this, you’ll want to run a few different valuation metrics on your business. This can be done with a variety of valuation tools, such as these:
BusinessValuation.com (fully customizable, free valuation reports): This is a website that gives you various tools to run your own valuation report on your company including determining what the market value is for your company as well as what you believe your company is worth. You can choose to either use the suggested listing price or define and run the report yourself to get specific data.
SitePeers: This is an online forum where business owners can connect with other business owners and give advice, and where business owners can share information about their businesses with each other. This is best suited for businesses that are already established so that you can get a fair appraisal from business owners who have a similar company to yours.
2) Determine What You Want To Get Out of The Sale of Your Business
When it comes to deciding what you want from the sale of your company, it helps to decide just how far you want to go with this. Is your “exit strategy” to simply sell your company any time an offer comes up? Or do you want a more complex plan?
If you want to maximize the amount of profit you can make from the sale of your business, you’ll need a very detailed plan. This means creating a business plan that lays out exactly how much you think your company is worth and how much value you want to get out of selling it.
That way, when the right offer comes along, you can negotiate from a position of strength and maximize the amount that both parties walk away with.
3) Develop a Plan of Action to Build Your Pipeline of Potential Buyers
You need to begin generating a pipeline of potential buyers before you are ready to begin selling your company. This means that you should start putting out the word about your company and getting people who might be interested in buying it to take interest.
There are a number of ways to do this:
Attract Interest Through Your Current Customer Base: If you have built up a customer base for your business, you can reach out and let them know that if they were ever interested in buying it, now might be the time (especially if there is new competition or other threats in the market).
Conclusion: Selling your business takes a lot of foresight, planning and hard work. But just because it’s not easy doesn’t mean that you can’t make a good profit if you put in the time. The key is being prepared and knowing what you want from the sale of your company so that you can achieve it.
Need advice on how to sell your business? Call us at (310) 781-1228 or fill out this form below!
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