You’ve worked hard and now it is time to kick back and relax. If you’re thinking of selling your business, it’s important to take the necessary steps to prepare it for sale. By following these 9 simple steps, you can maximize the value of your business and ensure a smooth transaction. So if you’re ready to sell, read on for tips on how to sell your business for the maximum return.
- Determine your goals and objectives for the sale of your business
- Determine the value of your business
- Get your financials in order
- Document your process and systems
- Ensure that your customer and employment contracts are documented and in good standing
- Work to eliminate overreliance on yourself or other key employees
- Organize your legal paperwork and corporate governance processes
- Update your business plan with a financial model and marketing plan
- Identify and contact potential buyers
Determine your goals and objectives for the sale of your business
The first step in preparing to sell your business is to determine your goals and objectives for the sale. What are you looking to achieve? Do you want to sell the business outright, or retain partial ownership? How much money do you want to make from the sale? Are you looking to retire? Fund a new business or investment? Are you looking to exit and find another job? What does your future hold and how does the sale of your business to meet those needs?
It is also helpful to ask yourself what do you want the future of your business to look like after you’re gone. Will the company or individual buying it run it as you’ve left it or is this a bolt-on acquisition for another business they own? Will your brand persist or be eliminated. As yourself what will happen to your staff and their families post acqusition? Also, think about what will happen to your customers and vendors?
Feel free to think outside the box. It is your business and you have a say in how it is sold and who you sell it to. Don’t rush into things and end up regreting the decisions you make. Take some time to really document what you want from a sale and use that to guide the sales process. Make sure you aren’t just selling for top dollar but that you feel good about who you’re handing your business over to.
Determine the value of your business
The second step is to determine the value of your business. This will help you set a realistic asking price and will also give you an idea of how much equity you have built up in the business. There are a number of ways to value a business, but the most common methods are:
Discounted cash flow – This method projects future cash flows and discounts them back to present value.
Comparable sales – This method looks at similar businesses that have been sold recently and uses those sale prices to value your business.
Asset-based valuation – This method looks at the value of the assets on the balance sheet, such as property, equipment, and inventory.
Once you have determined the value of your business, you can start to think about how much money you want to make from the sale. It is important to remember that the asking price is not always the same as the final sales price. There are a number of factors that can affect the final sales price, such as:
The current market conditions – If the market is hot, you may be able to get a higher price for your business.
The type of business – Some businesses are in high demand and will fetch a premium price. Elements like recurring revenue and long-term contracts can play into the value of your business.
The stage of the business – A business that is well-established and profitable will sell for more than a start-up.
The location of the business – A business located in a desirable area will sell for more than a business in a less desirable area.
Get your financials in order
The third step is to get your financials in order. This means preparing your financial statements and tax returns for the past few years and ensuring that they are up to date. It is also a good idea to have a certified public accountant (CPA) review your financials and provide a written opinion on their accuracy. This will give potential buyers more confidence in the numbers and make it more likely that they will make an offer.
Document your process and systems
The fourth step is to document your process and systems. This includes documenting everything from how you generate sales to how you manufacture your products or deliver your services. Buyers will want to see that your business has a well-oiled machine that they can easily replicate. This will give them confidence that they can take over the business and continue to run it successfully.
Ensure that your customer and employment contracts are documented and in good standing
The fifth step is to ensure that your customer and employment contracts are documented and in good standing. This includes making sure that all of your customers are under contract and that you have the right to terminate those contracts if necessary. It also means having signed employment agreements with all of your employees. These documents will give buyers peace of mind that they will be able to continue to operate the business without any legal issues or without a significant loss in talent or revenue following the purchase.
Work to eliminate over-reliance on yourself or other key employees
The sixth step is to work to eliminate overreliance on yourself or other key employees. This means putting systems and processes in place so that the business can run without you or your key employees. This will make the business more attractive to buyers because they will not be as worried about losing you or your key employees following the purchase.
Organize your legal paperwork and corporate governance processes
The seventh step is to organize your legal paperwork and corporate governance processes. This includes making sure that all of your business licenses and permits are up to date and that you have proper corporate governance in place. Buyers will want to see that you are a well-organized business with everything in order. They will also want to be sure that you have the legal footing to sell the business and that there are no hidden partners or legal issues that they will be buying into.
Update your business plan with a financial model and marketing plan
The eighth step is to update your business plan with a financial model and marketing plan. This will give potential buyers a roadmap for how you plan to grow the business and make it more profitable. It will also show them that you have put thought into the future of the business and that you have a clear vision for its growth. It will also help them understand the potential opportunities available if they should purchase the business.
Identify and contact potential buyers
The final step is to identify and contact potential buyers. This includes making a list of potential strategic and financial buyers that would be interested in your business. It also means reaching out to these buyers to gauge their interest and begin the process of selling your business.
There are a number of individuals looking to purchase businesses. One of the best places to sell a business is often to your biggest and most direct competitors, who will be pleased to see you depart the market. They already have experience in your sector and an understanding of the value of a company like yours, so they’re perfect candidates.
You can also list your business online. There are a number of websites that allow listings of businesses for sale for a fee. From there, you can work with an attorney to help handle the sale should you find a viable buyer.
Another opportunity is the open market and or broker networks. You could hire a business broker to help market your business to potential buyers either in your industry or outside of your industry. This can be a great fit but certainly, come at a cost. Business brokers often charge in the neighborhood of 10% of the sales price of your business and that can really add up given the price tag of most businesses.
The best option, at least in our opinion is to work with a private buyer like us here at XIT. We are looking to buy, hold, and grow great businesses. We’re not looking to divide or conquer your business but instead, help it grow and flourish long term. We bring world-class business management and marketing experience to help take the businesses we acquire to the next level and we would love to talk to you about your business to see if it may be a fit for our portfolio. We also pay top dollar for profitable businesses quickly without the fees and hassles of a broker.
Regardless of how you go about selling your business the steps outlined in this article will make life easier and help you get top dollar in the final sale of your business. If you have any questions or would like to learn more please reach out to us at any time.
