For many business owners, selling their company is the ultimate goal. Over time, they may find their business has outgrown them and needs an influx of capital or new ideas to continue its growth. For some, the idea of handing all control over a company they spent years building can be daunting; however, with careful planning and assistance, there are many benefits to selling your company.
The most important questions you need to ask yourself before selling your business is why you want to do it.
Your reasons for selling may include:
- Personal reasons (e.g., retirement, relocation)
- Business reasons ( e.g., lack of time and energy)
- Financial reasons ( e.g., debt reduction)
- An attractive offer from another individual or company.
Whatever the reason, it’s important that you are clear about your goals before you begin looking for a buyer. Because your motivation will guide the type of buyer you attract and how much money you can expect to receive for your business.
With that out of the way, let’s dive deep into the world of selling businesses.
Selling a business is a complicated, multi-step process that requires careful planning and preparation.
Here are the steps to selling your business.
You will want to make sure your business is ready for sale so that you can get the best price for it. It doesn’t matter if it’s a veterinary/medical practice you want to sell, a restaurant, or any other type of business; you can do some common things to prepare for a sale.
Here are some things you should do:
Get Organized: The first thing you should do is take an inventory of your business assets, including equipment, vehicles, furniture, and other items. Doing this will help you determine what you need when it comes time to pack up and move on from your current location.
Ensure the premises of your business is in good condition: Make sure that it’s in good shape. The premises should be clean, tidy and well maintained. Remember, you don’t have a second chance to make a first impression, so ensure everything is in place before you go out with your business for sale.
Make sure all your finances are in order – Review all of the financial statements for your company and make sure everything looks good, including any tax return, financial statements, and other documents relating to past years.
Also, review recent months receivables and payables through the books ( to see if there has been any change in cash flow). If necessary, hire an accountant or business consultant who specializes in this field to review these numbers with you.
Ensure your papers are ready:
Make sure you have all the necessary legal paperwork, such as licenses/permits; contract/agreements; patents/copyrights;trademarks/trade names; employee lists with salaries and benefits.
Update your website with all relevant information about the business:
Update your website with all relevant information about the business (i.e., hours of operation, products/services offered, etc). The value of your business can be greatly affected by the perception potential buyers have of it. If the site is outdated or poorly designed, it could give customers a negative impression and potentially drive them away.
Make sure to include all the information about your business that you think is important for potential buyers. In addition, it’s important to include any awards or recognition your company has received and any press coverage they may have gotten in local newspapers or magazines.
Step 2 – Determine its Appropriate Value
It’s important to be realistic about the value of your business.
Many owners struggle in this regard – they don’t know how much they should demand. Their emotional attachment to the company may make them biased because they believe it’s important for them to sell at a high price to get back what they put into it in terms of time and money.
The reality is that if you ask too much for the business, then chances are no one will buy it from you; however, if you set the price too low, no one will be interested as well because they will think there’s something wrong with it.
When you know how much your business is worth, you can make better decisions about whether it makes sense to sell now or whether there are other options available.
So how do you determine the price to sell your business?
There are three popular ways to determine the appropriate value of your company. They are:
Asset Approach: The summation of the value of all assets owned by your business is used to determine its value.
Income Approach: The amount of money your business makes yearly is multiplied by a multiplier such as the business’s age, its assets’ condition, and so on.
Market Approach: Using this method, you compare your business to similar ones and look at how much their owners sold them. While you can quickly use this approach to determine a price for your business, it is not often the most accurate valuation method.
Step 3 : Find And Qualify Buyers
It’s important to note that the buyers you are looking for may not be the one who will offer the highest price. Your goal is to find a buyer who will pay what your business is worth and still make it worth your while.
If you have defined all these things, it’s time to find a qualified buyer.
Step 4: Negotiate And Close The Deal
Now that you have got the buyer interested, it’s time for the final negotiation.
The first step to closing a business sale is the negotiation process. It’s time for you and your buyer to work out all of the details of the transaction- from the price and how the buyer will pay to any contingencies that might come up.
The negotiation phase is also a great opportunity to get your buyer’s input on any unique challenges you have encountered during the sales process and how they might impact their decision.
There are many moving parts here; consider each of them carefully before making any decision.
Crucial documents you will need at this stage include:
- Letter Of Intent (LOI) : A properly drafted letter of intent is essential for any transaction. It should recite the preliminary terms and conditions upon which the parties intend to complete a definitive agreement for the sale of the business and assets.
- Non-Disclosure Agreement: A non-disclosure agreement (NDA) is a legally binding contract designed to protect the confidentiality of sensitive information during a potential business transaction.
- Sales Agreement: This document establishes the terms you are selling your company. It details the price, method of payment, forms of payment, penalties for defaulting, who owns what in the event of an acquisition or merger, and what happens if an investor backs out or wants more time to evaluate their investment opportunity.
Tips on negotiating with your buyer:
- Be prepared to walk away if you do not get a good deal.
- If you are negotiating with a cash buyer, make sure they have enough capital to purchase your business.
- Make sure there are no contingencies on closing, such as financing or escrow requirements.
Pro-Tip: Work With A Proven Partner To Sell Your Business
You can’t be the best at everything. When it comes to selling your business, this is especially true.
Before you start looking for buyers and put all your eggs in that basket, find an experienced partner who can help ensure a smooth transition for all parties involved.
It’s not something that should be taken lightly or tackled alone. You want someone who knows what they are doing, so ensure you do your due diligence if you decide to go down this route.
We hope you have found this guide helpful. We know that selling a business can be a stressful and overwhelming experience. However, we believe you can make it happen with the right preparation and guidance.