As a small business owner, you’ve poured more than long hours into your business to get it to where it is today. You’ve built your company from scratch and it certainly won’t be easy to put it up on the market. Whether from illness or partnership disputes, burnout or declining revenues, negative industry changes or retirement, there are many reasons entrepreneurs decide to sell their businesses. And it’s perfectly fine.
In fact, selling your small business can be immensely rewarding. But you have to take the right approach and carefully consider several factors before you proceed. It requires proper preparation, the right strategy, and getting help from the right professionals. And remember, this isn’t something that will happen overnight or in a couple of days.
It’s not uncommon for small business owners to feel overwhelmed or even get confused by what seems like a complex, drawn-out process. Here are seven considerations that can help you get your small business ready for sale, attract the right buyer, and get a great deal.
Timing of the Sale
If you’re planning to sell your small business in the near future, now is the time to start developing robust internal systems, improving your business structure, boosting your sales, and making the business more profitable. As mentioned, selling a business doesn’t just happen overnight; it takes time. As such, focusing so much effort on putting your company in the market that you neglect your business itself can be a red flag for prospective buyers. Preparing for the sale a year or two ahead of time can help you maximize the return on your investment. Make sure you’re building a business worth selling. And that means improving the efficiency of your business’s day-to-day operations as well as its profitability.
Arriving at a Realistic Valuation
The value of your business can be anywhere from two to ten times your current cash flow. To avoid listing the sale price too low or too high, consider bringing in a valuation expert to help you set a more realistic figure. For a fixed amount, a third-party valuation will help you get the actual value of your company, based on your liabilities, revenue, sales, inventory, and market conditions.
If you have valuable fixed assets, such as equipment from Machinery Network, be sure to include that in the valuation or resell it on the machinerynetwork.com platform and adjust your valuation accordingly. The valuation expert will provide you with a detailed report which will bring credibility to the sale price, if potential buyers doubt or question your business’s worth.
Organizing your Financials
Keep in mind that prospective buyers-and nearly everyone else involved in the sale process- will want to comb through your tax returns, customer data, payment records, bank statements, supplier and vendor contracts, and every other important document in your business. Therefore, it is crucial that you review all your financial and legal records to make sure they’re clean, organized, and up-to-date.
A diligent buyer will want as much transparency as possible. Consider working with your small business accountant to get everything in order. That means reviewing up to five years’ worth of financial statements and tax returns. Any disorganization, inconsistencies, or mistakes in your bookkeeping could be a huge red flag for prospective buyers.
Getting the Right Help on Board
You will need to closely work with an accountant and a lawyer during the sale process. If you don’t have them yet, now is the best time to start looking. Outside of that, you’re the one to decide whether or not to work with an appraiser, business broker or any other professional.
If you’re selling your small business to a trusted friend or family member, you may not need to hire a broker. Remember a business broker serves as a sales agent and often needs to be paid a brokerage fee. This means you can save money when you sell the business yourself.
That said, the role of a broker is to shepherd the small business owner through what seems like a complicated process. Business brokers have years of experience and expertise selling businesses of all sizes and can help you get an excellent deal and sell your company faster than you could by yourself. Working with one will be your best bet.
Marketing Your Business for Sale
One of the challenges you’re likely to face when you put your small business on the market is maintaining confidentiality. A business broker can provide you with the confidentiality you need during the sale. Your employees and clients could get skittish and your competitors may take advantage of the situation if they find out you’re listing your business for sale. Maintain confidentiality at all costs and only communicate to your team when you’re ready.
Selling Your Website
The process of selling a website is no different from that of selling a company. You have to determine your websites’ worth, based on your customer acquisition channels, yearly sales and profits, its position in the market, growth trend, and scalability. These are some of the factors potential buyers will look at before they can decide whether or not to buy your website.
You want to make sure your business offers a lower risk so you can get prospective buyers to offer you an excellent deal. A risky business with poor sales and low profit margins will be harder to market and sell.
Before you think of selling your website, make sure you’ve positioned your branding in the market, developed efficient business processes and systems, and have a clean legal history. These are some of the things that will make your offer stand out. A diligent buyer will want to see the history of your traffic stats as well as your traffic sources. They want to make sure your business can drive new sales and has potential for growth. With platforms such as BizBuySell and Flippa, listing your website for sale and finding potential buyers shouldn’t be a complicated process.