Are You Ready To Sell Your Business?

You've put everything you have into your business and now it's time to sell. Potential buyers won't flock to your business if you simply put up a for sale sign. Selling a business requires a good amount of legwork! Start Early. Selling a business is typically more difficult to sell than a residential property and may take longer to find a qualified buyer. In most cases, it takes at minimum 6 months - and only if everything is in order. Heavy planning is necessary: get financials ready, figure out what your business is worth, evaluate the selling market, decide if you want to use a broker, determine tax liabilities and work with potential buyers. Determine Clear Reason to Sell Business. Many reasons for selling a business include: <ul> <li>Personal Reasons - Death, Illness, divorce, relocation, etc.</li> <li>Get out While the Going is Good - A growing company is more attractive that stagnant ones</li> <li>Industry in Upturn - Industry is hot and no shortage of entrepreneurs</li> <li>Low Interest Rates - Interest expenses are reduced & monthly installment payments are lower. Buyers can qualify for higher loan amount</li> <li>Partnership Dissolves - Buying out one another is not an option</li> </ul> Have Financials In Order. You should have the past 3 years of financial statements and tax returns readily available. Make sure they are clean and easy to read. Take care of any outstanding issues with the IRS or lenders as to not diminish the trust of the buyer. Personal expenses, such as salary, should be left out because your buyer will not inherit those costs.  Most importantly, do not show your financial statements to everyone who inquires. Require a written offer with a contingency to review financial documents. Call Real Estate Broker or Appraiser. The broker can give you an estimate of what the business is worth, evaluate the equipment, and give you a list of similar business that have sold and their sales figures. Most times there is a fee of 10% which will take a small chunk out of your revenue, but can become valuable in the long run. For example, selling on your own you could get $700,000 for your business. But if you hired a good broker who gets $850,000 for your business, and takes the 10% commission, you'd still net $765,000 or $65K more than on your own. Knowing your worth is the most important. If you choose not to use a broker, hire an appraiser who can work through the technicalities of determining its value. Stay Organized. Keep a folder of all contacts, notes, and paperwork involved in your business for sale transaction. Keep a log of all potential buyers that contact you (phone numbers, email addresses) and keep notes about them. You should have backup buyers in case your first choice drops out. Also keep all escrow info, purchase agreements, signed non-disclosure documents, contact info of attorneys, and any other important information in this folder. Know Your Market! Even if you are working with a broker, it's important to know the recent sale prices of comparable businesses. It's also important to monitor whether your industry or the economy is about to slow down or grow. Growth potential is a priority for potential buyers. This takes some market research that can be done online or through industry publications. Also read business magazines and newsletters to see what similar business are for sale. Know Your Buyers. Competitors and other businesses with similar services are probably better buyers than those simply interested in your business for financial reasons. It's also important to know what kind of return on investment potential buyers expect, and what your business can deliver. The most obvious category of buyers is other companies in the same business for which the acquisition would be a logical expansion with potential high profits. Consideration should also be given to suppliers and customers of the business. Most of the prospective buyers are individuals who want to control their own future. As well, many of them could be moving into the area from other states and countries. Determine a Marketing Strategy. Find out what tools will get you the most exposure. Websites, such as <a href="http://www.bizgopher.com/">BizGopher.com</a>, are great resources for selling and marketing your business. No one is more motivated, passionate, and knowledgeable about their business than you. Get the word out there about your business. Determine If Clientele Will Be Affected. Will you lose a portion of your customer base due to you selling? Also, sound working relationships with employees, suppliers, and bankers are important if not critical factors to a company. Any premature indication of a possible change in ownership could disrupt these relations and weaken the company's competitive position. For these reasons and many others, confidentiality is important at all stages. In every transaction, there is an appropriate time to reveal that a sale may be imminent. Proper timing of these sensitive announcements can contribute to a smooth transaction and reinforce the buyer's willingness to proceed to a closing. Remember to Stay Positive! Keep calm and have a positive outlook throughout the selling process. If you are prepared, follow through with all possible buyers and stay organized, you will be successful 2009-02-03T20:50:03Z