There are many reasons you may decide to sell a business. Maybe it is time to retire, you want to move on to the next big idea or you simply want to spend more time with your family. Selling a business can give you the financial push you need to move forward with these lifestyle changes.
However, you must be careful as you prepare to sell your company. Here are some things you may need to know about selling a business.
Get an accurate valuation
You can try to come up with the company’s value on your own, but it will probably be much wiser to have an expert evaluate your company. For one thing, the value of your company is based on more than revenue. Experienced buyers know that profitability is more important than revenue. Buyers may also look at things unrelated to the numbers, like a strong management team, ability for growth and infrastructure.
An accountant can review your business and provide a valuation. There are also certified valuers and business brokers. These professionals evaluate businesses on a regular basis and should be able to provide an accurate valuation.
Make sure the business is doing well
You are not to sell a business that is losing money. People buy businesses because they want to make money off an already established company. Typically, buyers are interested in your last 12 months of sales. However, if you have numbers showing a steady increase over the years, be sure to share this information as well. It will show the company’s potential for growth.
Buyers want to see numbers
If you claim your business makes $30,000 a month in revenue, you need financial documents to back that up. You may share bank statements, sales numbers from your website or your online bank account information. You need a paper trail to back up the numbers used to support your company’s value.
Get ready to answer a lot of questions
Buyers may ask you questions, even ones they could easily look up in the information you provided them. They could ask about the way your valuation was determined, how you got started with the business, how management is structured and even why you are selling the business. Be prepared to answer these questions, and try to be as honest as possible.
Experienced buyers will understand your business is not perfect. Tell them about any issues you have, rather than risk them finding out about problems later. This will show you are trying to be transparent, and the buyer will be more likely to trust you.
Be prepared to negotiate
According to Inc., when business owners are too focused on the purchase price, they get out-negotiated. When structuring the final deal, you will need to consider things like taxes from the transaction, paying for inspections and other intangibles. You may also want to include a nondisclosure agreement in your final agreement. Including all this information in your final agreement will protect you and your interests after the sale is complete and help make sure you get a fair price for your business.
Selling a business may allow you to move onto a new chapter in your life. Just remember, it is a complex process that needs to be approached carefully and with much preparation.