How to Prepare Your Business Before Selling
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So, the time has come to sell your business? There are many ways you can approach selling, but before you do, you should consider preparing your business for its sale. This includes going over every aspect of your business and fine-tuning it so that when the time comes to put it on the market, it attracts potential buyers and investors quickly.
In this article, we’ll guide you through a few ways that you can prepare your business for its sale. Starting with why you want to sell in the first place.
1. Consider why you want to sell
Establishing your reason for wanting to sell is an important first step to take. When you sit down with potential buyers, the first thing they’ll ask is why do you want to sell? Your answer might be the make-or-break it for the whole deal, so it's best you get it right.
We’ve seen many business owners sell their businesses prematurely because they don’t have the grit or the energy to see their business plan through till it becomes successful. Instead, they sell because of challenging market conditions or an inability to keep up with the competition. Now, we aren’t saying that you shouldn’t sell if this is how you feel. Rather, we want you to consider why you’re selling so you don’t regret it further down the road.
2. Contact a broker
Once you’ve come to terms with why you’re selling, the next step we’d suggest you take is to find a reputable business broker. Business brokers are responsible for helping investors and business owners purchase and sell their companies. Look for a broker that has a good reputation. Check their reviews and ask other business owners about the company to see if they’ll really have your best interest at heart. From there, book a consultation with them and give them your goals. Remember, this is only the start of a lengthy process, so be patient with them
3. Get your business in order
After your initial consultation with a broker, they’ll want to inspect your business from the sale. During this time, they’ll identify any issues with your finances, taxes, employees, and the overall running of your business and advise you on how to change them so your business looks more appealing to potential buyers.
A good team of employees is an asset on its own. Look for employees who have qualifications relevant to your business, like a qualification in business administration or management. They’ll also prop up your business’s appearance.
Listen to them and make these changes promptly. Get your house in order so that when you move to the marketing stage, the business is ready to be handed over.
4. Identify how you can increase its value
Now that the kinks in your business have been ironed out, you’ll want to get your business valuation done. We often have an idea of how much our businesses are worth according to how much we’ve invested in them, but realistically, these figures don’t exactly allow for a meet-up. So, going into having your business valuation done, don’t rely on your emotional attachment to the business; rather, focus on the material aspects the business valuators will look at. Here’s what a business valuation service will look at:
- Business performance
- Risk
- Value driver assessment
- Profit and cash flow
- Compliance and legal regulations
- How you can improve
5. Consider the kind of buyer you’d want
Once you’ve got a price on your business your broker can start reaching out to their network of investors. At this stage, we’d suggest you communicate with your broker clearly on the type of person you want to buy your business. Some business owners want someone who’ll keep their business going, treat their employees fairly and with respect, and grow the business to a point they couldn’t get it too.
Others are happy with selling their business to someone who’ll flip it for a profit the first chance they get. Either way, the type of person you want to sell to. This will also give your broker a direction on who to market it to.
6. Allow your broker to put it on the market
So, you’ve followed your brokers instructions and gotten your business ready to sell, they’ve done the valuation and set a fair price, and you’ve described to them the kind of person you want to sell your business to, now all that’s left is to allow them to put it on the market and wait for offers to be made. We’re still at the start of the sale process here.
Next, your broker will likely shortlist the best offers and allow you to go over them with you. When you accept an offer, they’ll write up the paperwork, run the negotiations and close the sale.
Final Thoughts
Running your business in a way that it would sell tomorrow is the best way to ensure you’re always prepared. But, if it comes to selling and there are a few things you need to tweak, then do it as soon as possible. The better your business looks, the more you’re likely to get for it.
