When it comes to selling your business, mistakes are all too easily made and can result in significant financial losses, so many experts suggest hiring a professional broker.
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There are several important steps you can take to prepare your business for sale and maximize your profits. Here are five basic things to think about when developing an exit strategy:
Strengthen your books. The moment you decide to sell your business, you should begin working toward increasing its value. Even if you plan on selling right away, the sale of a small business can often take well over two years to complete, leaving a good deal of time to drive its retail value up.
During this period, you should strive to improve the books by increasing sales and maximizing profits wherever possible. Begin by analyzing every aspect of the business to identify inefficiencies or cost-saving measures that could affect profitability.
Prepare the staff for transition. Depending on your situation, it may be wise to take a hands-off approach during the period leading up to the sale.
Potential buyers realize that the rest of your staff will need to take over business operations while ownership changes hands. If you can demonstrate that the company will operate efficiently without you at the helm, it could boost the buyer’s confidence and increase the sale price.
Perform a business valuation. Before placing your business on the market, hire an experienced appraiser to perform a valuation of your company. Placing a price tag on your business will enable you to gauge buyer offers and negotiate a better figure. A good appraiser should also provide valuable information on the company’s strengths and weaknesses, which you can use to help improve its retail value.
Find a buyer. Once you’ve assessed and prepared your business for the sale, you’re ready to seek out a buyer. A business broker or mergers and acquisitions professional can help promote your business on the market, line up potential sales and sidestep some of the risks involved in selling on your own. Public advertisements can be a great way to reach prospective buyers, but if word of your intention to sell gets out too early, it could cause a panic among your employees or customers. Instead you should instruct a broker to purchase the ads in his or her name and keep your identity out of all dealings with potential buyers.
Sell to the right person. Never assume that a buyer has all the money for the purchase. As dealings begin to progress, have your business attorney review and approve the financial statements of prospective buyers before agreeing to a sale. Once a deal has been reached, establish clear deadlines for when each portion of the payments are due.