I Know I Want to Sell my Business. Now What?
So, you’ve decided to sell your small business and move on to new pursuits. The process of transitioning away from a small business that has been built upon personal sacrifice and effort can be daunting, but this guide will help you get a clear picture of a way forward. Let’s take a look.
After taking that initial plunge, which is deciding for sure that you want to sell your business, the first step is to get your business in the best shape possible. A healthy looking business will be more attractive to buyers and will create fewer headaches during the transition. Clean up your financial inbox and outbox; pay off any outstanding debts your business owes and collect on any debts owed to it. Assemble your financial records and ensure your books are in order, this will help potential buyers develop a clear picture of the business’ financial situation. If you are uncertain how to organize your accounting, you might consider turning the task over to a professional CPA that specializes in your type of business.
The purpose of cleaning up the financial situation is to make your business more attractive to potential buyers. Improved records are not the only way to do this however, you can also review your business practice and identify areas that can be improved. By taking steps toward these improvements, you can create an image for your business that is vibrant and full of growth potential. This will make your business much more appealing to potential buyers and give you a stronger negotiating position.
Once you have laid this initial groundwork with your own expertise, you may want to invest in a broker that specializes in your type of business. Unless you are well-connected in your industry, know all of the players and can afford to run your business while simultaneously trying to sell it, you would be well-served allowing a broker to do the heavy lifting for you. A broker will eliminate the need for you to advertise, value and negotiate your sale.
In the event that you opt to handle the sale on your own, we will cover a few things here that may help you with the process:
1) List your Business
No one can buy your business if they do not know it is for sale. There are several avenues for listing your business and you’ll need to weigh your options and associated costs to select the best routes for you. There are specialty websites that will allow you to list or you can take out an ad in local newspapers or business publications. If you are a member of a trade association, they will often have a process by which you can list to other members. If worse comes to worst and you have strong connections in the industry, you can advertise by word-of-mouth.
2) Only Entertain Serious Buyers
Working with potential buyers will eat up your time and resources, which is acceptable if the sale is going somewhere but can be detrimental if the buyer is just fishing. You can try to prevent this by forcing potential buyers to make certain commitments before getting too far into the process. Asking them to sign a non-disclosure agreement early in the process and requesting sensitive financial details (such as a summary or credit score) is a good way to do this. Not only does this prevent you from getting caught up in a dead-end lead, it demonstrates to serious buyers that you know what you are doing.
3) Have your Documents Ready
There are several documents that are necessary before a sale can be completed and it will benefit you greatly to have these ready in advance. Not only will this ensure the sale goes smoothly, it will build confidence in your buyer as well. These documents include, but are not limited to:
- Tax returns for last several years
- Cash Flow Statement
- Balance sheet
- Public Filings
- Accounts Payable & Receivable
- Lease Contract
The tasks and items discussed in this article should be considered the bare minimum requirements for selling your small business. Navigating the myriad paths that lead to the best deal can be challenging even for seasoned business veterans, which is why we would recommend investing in a business broker. Hallmark Business Brokers, Inc. is a business brokerage firm servicing Sarasota County and we can assist you with all of your business sale needs. Even if you are only considering a sale, you may contact us at (941) 445-4726 for a no-cost confidential interview to help determine if selling is the right path for you.