Once you have decided to sell your business, you have important work to do to make sure that it is not only ready for sale, but for your desired terms. Most successful business owners are not experienced in the selling process and many feel that they don’t have the time to run their business and simultaneously market it for sale.
Because this transaction is too important to be left to chance, many business owners choose a business broker who can offer expert assistance to help them with the numerous steps involved in selling their business.
Here are some of the steps involved in selling your business:
1. Determine the value of your company.
A business broker will determine and agree with you, as a seller, a price to market your business based on a variety of metrics. Below are some of the more common metrics:
- Multiple of earnings compared to comparable businesses (net profit or owner’s benefit times an industry multiple)
- Percentage of the gross revenue, typically this would be somewhere between 20% to 50% and based on industry benchmarks
- When the business has little or no profit, the appraiser can use the value of the business’s assets (i.e. inventory, equipment and goodwill)
2. Based on what is required for a business evaluation, you will need to make sure that all of your business’s financial documentation is current and correct.
Make certain that you have:
- Your last 3 to 5 years financial statements
- Tax returns for the same period
- Your latest interim financial statements and management accounts, as well as aged accounts receivable
- Inventory ledger and inventory costing policies
- Fixed asset or property list with age and purchase price
- Plant and equipment ledger
- Aged accounts payable
- Notes or loans payable
- Contingent or “off-balance sheet or unrecorded” liabilities (such as pending or existing lawsuits); related parties (or parties with conflicts of interest) and the details of these transactions
- Existing contracts or agreements (such as equipment and facility leases)
- Key person information and whether he/she is insured with a life insurance policy with the company as the beneficiary
- Owners and their percentages of ownership interest
- A list of patents, copyrights, trademarks, and other intellectual properties and intangible assets
3. Decide what you would like your exit strategy to be and prepare a plan that works best for you to achieve it.
Consider why you are selling your business. Are you retiring? Do you hope to use the proceeds to start another business? Would you like to stay with the business and work with the new owner for a while before you exit the business? Once you have answered these questions, figure out your ideal time to exit and develop a plan that covers the best way for you to do it.
4. Begin to boost your sales to show strong year on year (YOY) growth.
You will want potential buyers to see how well your business is performing and that it is viable for many years to come. The best way to do it is to institute heightened promotional and other marketing activities that both boost your sales numbers and active customer lists.
5. Find a business broker.
To maximise the profit you would like to make from selling your business it is important to use a professional business broker. Here’s why:
- They conduct a broker opinion of value on your business that will achieve an estimate of its worth and provide ways to increase its value.
- Keeping business and financial information confidential is nearly impossible if you are representing yourself.
- Business brokers create a strategic marketing plan and advertise your business, giving it maximum exposure to the most qualified buyers.
- Experienced business advisors will help you get the best price and terms to secure a successful transaction.
- They pre-qualify buyers for your business.
6. Pre-qualify potential buyers for your business.
This is one of the most important tasks for anyone selling a business. If qualifying potential buyers isn’t done properly, a lot of critical time and opportunities can be wasted – plus, you run the risk of embarking on an unsuccessful transaction. A professional business broker is an expert at making sure to only bring you buyers that are right for your business.
Because selling your business involves many complicated steps, you will want to find a business broker who can help you successfully navigate them. Transworld Business Advisors has an impressive track record of helping business owners across many industries sell their companies at their desired price.
We use Transworld’s network and the latest technology to present your company to other business brokers and strategic buyers all over the world. This means that you have literally thousands of industry professionals selling your company, yet your confidentiality is always respected.
At Transworld Business Advisors, we qualify buyers by first making certain they have the financial ability to meet the offer for your business. We then reduce that number to only the most qualified buyers.
Contact us to talk about how we can help you get the best price for your business.