A Handful Guide for Business Owners to Sell Small Businesses
Deciding to sell small businesses is a complicated process, which can affect your professional and personal life. There are crucial things to walk through when you sell a small business and effectively get good prospects.
Selling a business can be a challenging process, but a lot can go wrong before closing a deal. There are risks in selling a small business and you can limit them. You need to get familiar with the risks to become aware of and find a solution, such as:
- failure to find a buyer
- selling at too low price
- runs a breach of confidentiality
While the sale of a business is unique the fundamental process stays the same. There are well-established steps and follow them to get through the sale and get the best price.
Steps to sell small businesses
When you are ready to sell a business, you should take steps to help land the deal and ensure the transfer of ownership goes smoothly.
Keep clean and well-documented financials!
The first reason companies don’t see is weak or poor financials. It means you must pay the taxes and show the profit on the tax returns. The financial data of a company is the foundation of your future sales. So, getting it right is crucial.
Work with the tax professional and the accountant to form the basis of your company’s valuation and sale negotiation. Potential buyers scrutinize the business’s financials because they form the valuation basis. Thus, the more information and the statements to gather the better. While you get your finances orderly, consider some questions:
- Does it own an intellectual property?
- What’s special about the business to make it worthy
- Documented standard operating procedures to give the acquirer
- Strengths and weaknesses of the business
Estimate your business’s worth!
You might think you are aware of the value of your business and for you it is priceless. But, there is a fair market value for your company and you will need a professional to help determine it. Get an expert to check the stability of your business, including the historic sales and its expenses. An anticipated performance helps maximize the valuation without overpricing the business and scare off potential buyers.
The valuation process may include the analysis of the following:
- company’s financials
- products and services
- business model
- marketing strategies
- management team
Everything relevant to the latest health and future potential for the business is considered. You will receive a range or estimate the business is worth and the amount to expect from selling it. The valuation will be based on various businesses’ profits, determined by the same companies that have recently sold.
Some variables make a business more worthwhile than its competitors:
- Growth rate
- Competitive advantages
- Market share
- The size of your company
- Industry and business model
- Sales and distribution
- Capital insensitivity of the business
- Competency of the management team
Every business is distinct. So, it is essential to have a professional valuation from a reliable third party.
Look for a pre-qualified buyer and make a negotiation. After finding the right buyer, finalize the contract and make a negotiation.
