1. Figure out the Financials
Define the Company Value. In order to sell a business you must know what that business is worth. Take the time to organize the business money and financial data. And be sure to have a proper valuation of the business done. If you work with a Business Broker they will be able to help you with this part of the process.
2. Organize the Financials
This may seem obvious, but you’d be amazed at how many people don’t have their numbers figured out. It’s not exactly a secret that bookkeeping in most small businesses is not up to par. So if this is you, it’s important to straighten out financial statements as it is common for buyers to want to view at least the past three years of a company’s financial history. Bad and disorganized financials will make a buyer walk away faster than a competitive mall walker. Not only that but organizing your companies’ financial records can enhance the value and make it more attractive to buyers. Be sure to ask your Broker about incorporating a list of add backs. These are expenses which won’t necessarily be recurring under the new ownership, such as car expenses, owner salaries
3. Increase Business Sales
If you want to have a better chance of selling you business quickly and for top dollar take some time to increase your companies sales. Having too few of customers or low / slow sales growth can but a quick end to a potential business deal. Healthy income streams and numerous revenue sources are attractive to buyers so the better this is when you sell the better off you will be when the offer is made and the deal closes.
4. Time Your Exit
They say that business owners should plan their exit a year or two in advance. While this is not always possible or a reality, if you can plan ahead the more time you give yourself to prepare for the sale of the business the better off you will be when it comes time to sell. By giving yourself time to prepare you have time to improve sales, financial records and your customer base. All things which will make your business more lucrative AND more attractive to buyers. The best time to sell a business is when it is good financial standing. And one of the worst mistakes you can have is not having an exit plan. For maximum value on your business put in place a solid exit strategy ASAP before the unpredictable puts you in a position of selling before you are ready.
5. Get a Broker
Retaining a business broker to help handle the sale of your business can be a priceless move to make. The Broker will help with a proper valuation of the business, recast the business financials in preparation for the sale. One of the Business Broker’s most important functions may be finding a buyer and helping to negotiate and close sale. These Brokers typically work by charging a fee around 10 – 12% with minimums. Sometimes they wont get involved is the deal is too small. Always make sure that your Broker is qualified and certified with the proper professional designations for your state. You’ll want to make sure that your Business Broker also has a real estate license as these deals often involve real estate transactions.
6. Finding & Qualifying the Best Buyer
Finding the best buyer for a business sale is often a much larger decision than most sellers think initially. While there do exist options such as selling your business or a part of it to the employees, many sellers opt to sell to another person. There are two types of buyers to consider when finding the best buyer for your business. They are financial buyers and strategic buyers.
Financial buyers are those that are focused on the ROI of the business they are
looking to buy and are often open looking at businesses in a number of different business industry verticals.
Strategic buyers are the people who are more interested in how that business will fit into an overall business strategy and most often are already in the same industry and typically are willing to pay more than financial buyers.
7. Due Diligence and Closing the Deal
More often than not, in privately handled business sales, when a business deal goes south it is due to lack of due diligence or negotiating. Keep this part of the process neat and tidy with a good business broker. From the beginning to the end of the Business Merger or Acquisition Process a good Broker is a priceless commodity and a key component of a smooth merger & acquisition.
If you are needing assistance selling your business please reach out to us here at Pacific Merger Group via phone at 469-569-8347 or email us at Allen@pacificmergergroup.com