Selling a small business takes a lot of preparation. Before you start the process, ensure that your accounting records are clean and up to date.
It is also important to time the sale of your business with your financial goals in mind. This will help you maximize your earnings from the sale.
Identifying Potential Buyers
While it only takes one buyer to successfully sell your business, finding this person can be a daunting task. Before you even consider the possibility of selling your company, you should carefully research potential buyers and make a list of who might be interested in buying it. These potential buyers should include competitors, employees, family members, friends, and other community residents.
You will have to disclose some detailed financial and strategic information for each prospect, but it is important to carefully balance this with maintaining confidentiality. For example, you may want to consider hiring an investment firm that specializes in business sales to approach prospective buyers on your behalf and maintain confidentiality.
You also might consider posting a “For Sale” sign in your storefront or listing your business on websites that specialize in businesses for sale, such as BizBuySell or BizExit. However, this method can be expensive and requires some advertising expertise. A more effective, but less costly method, is reaching out personally to prospects through in-person networking and email.
Preparing Your Business for Sale
Selling a business is complex and requires planning. The goal is to sell the business for a fair price, secure a legacy for employees, and avoid disruption of business operations and customer relationships. The process can take time and, like starting a business, isn’t for the faint of heart.
A critical step in preparing for sale is cleaning up financial records and getting ready for the transition to a new owner. Buyers will be looking at financial statements and projections, and a business with clean books is more attractive to buyers.
In addition to getting the company’s financial house in order, VandenBerg said it’s important to position a business to attract the right type of buyer. For example, a business structured as a single-member LLC may be more desirable to an investor than a corporate group. That will determine how much the company is worth and could impact the tax bill at the time of sale.
Finding a Buyer
Just like selling a house, there’s a lot of work involved in making a small business sale happen. You’ll need to get your books in order, find a buyer and negotiate the deal. Fortunately, there are tried-and-true ways to sell a business successfully.
Positioning your business to appeal to a target group of buyers will determine how much you can ask for it. A professional business appraisal is key for establishing what your company’s worth to potential buyers. However, buyers will also consider nonfinancial aspects of a business such as its location, management team and industry trade secrets.
Hiring a business broker or mergers and acquisitions adviser to conduct a targeted search can expedite the process. You may also use online marketplaces such as BizQuest to list your business for sale. Before revealing any sensitive information, make sure interested parties sign nondisclosure agreements. This will weed out timewasters and allow you to screen for qualified prospects.
Negotiating the Sale
Once you’ve found a buyer and agreed on a price, it’s time to negotiate the finer points of the deal. This includes things like the purchase agreement, representations and warranties, and non-competition agreements. It’s important to be firm on your non-negotiables but also flexible where possible in order to achieve a successful sale.
It’s also important to plan for a structured transition. This could include training the new owner, passing over client contacts and other information, and ensuring that all financial obligations are met. If you’ve promised to remain on hand to assist with the transition, it’s crucial to follow through with this commitment.
Mastering the art of negotiating when sell a small business involves careful preparation and understanding your company’s value in the context of the market. Seeking expert advice from a trusted advisor such as Acquira can help ensure you get the best value for your business and that your objectives are clear for every step of the process.