Seven Questions to Consider Before Selling Your Business
Many factors influence your decision to sell your company. Many soon-to-be retirees desire a change of scenery. If you choose to sell your business and think more and more about it, you must first address numerous crucial issues.
You want to sell your business profitably and on time. It’s a lot harder than it seems. It’s not like marketing a home and waiting for a buyer to secure financing before closing.
There are many more steps involved in selling a business. Before selling your business, consider the following points.
Is it the right time?
Is it the right time to sell your business? Is it thriving? Are your financial statements up to date and in good condition?
While most businesses keep their books to minimize taxes, this does not reflect their earnings. To show a buyer this, recast your books. If you’re not an accountant, you’ll need their help.
Finally, make sure your company’s technology and equipment are up to date, as well as your debts. In addition, did you get an accurate business valuation?
What’s it Worth?
Now consider your company’s worth. A professional will know the business’s value better than the owner. An experienced business valuation will reveal this.
- What is your company’s worth? Is there a market price for your business?
- What is the market value of your equipment? You’ll need to evaluate your equipment to find out. Maybe a separate equipment appraisal will be required.
- What is the value of your customer base and reputation?
- What are your company’s other assets worth? Is it better to sell all or just a few?
These questions will help you determine your company’s overall value. What is the listed price, and what experienced business broker do you engage? But the story doesn’t end there.
Where is the Industry Going?
Ensure your company is healthy and growing before selling it. How do you see the company evolving in the next 5-10 years?
The parties involved in the sale of your business will conduct due diligence on your business and the industry. Be completely honest with yourself. What are the “skeletons” in your business? During due diligence, your buyer will find them.
A buyer typically will never invest in a company that cannot generate long-term profits. Before selling your business, do your homework. Make sure you understand your industry and how it may be changing for good or bad. If your industry is changing, you may want to wait to sell your company until the change is complete.
Who is The Strategic Buyer?
Without a management buyout or a family takeover, you may not know your buyer. However, you should identify your ideal customer. An experienced business broker can assist you in reviewing the options in finding the “right strategic buyer”:
- What skills will the buyer need?
- What state and local licenses will they need?
- What kind of financing is available – SBA?
Consider all the buyer factors, including the buyer’s impact on company culture, relocation requirements, and more.
Business Sale Takes How Long?
This is a significant question. You may have to sell your company at a loss and make numerous concessions to get out quickly. A business sale takes time, no matter what. The process can be lengthy and complex. No buyer is willing to waive due diligence and financing. These are rare occurrences.
Once you’ve found a buyer, the process could take months. Finding a buyer and a deal can take months or years. In addition, it is often expected that the seller may assist the new owner in ensuring a smooth transition.
Adaptability is required to maximize your business’s sale value. The reasons for selling your business determine much of this. Adjust your plans in light of this.
My Business is Sold – But Do I Get Paid?
We understand that sellers want to be paid right away. When you sell your business, you can get paid in several ways.
You may be able to finance a portion of the transaction and earn interest while maintaining a steady income.
Other deals include sales-based payouts, balloon payments over time, or payments in the form of stock or business ownership. If you get your asking price, it doesn’t mean you’ll get rich quickly.
Selling a business is a difficult task. You can’t do it alone. It would be best if you had a team, and your experienced business broker is often the quarterback. They will help you determine your company’s value, market it to the right people, and give you exit options that you deserve for the many years you worked so hard to grow your business.
Michael Schwantes is President & CEO of Creative Business Services/CBS-Global.