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I Want to Sell My Business – Now What?

You have decided, “I want to sell my business,” but where do you start? Most small business owners have never sold a business before and have many questions about the selling process.

Here are some of the most common questions and answers to help you understand how to sell your business.

Question: What is my business worth?

Answer: This is the most commonly asked question. The value of a business depends on many factors including the profit, the current economic situation, the market and much more. Although this is a very straight forward question, the answer is not straight forward.

There are many methods used to value a business and depending on the business there can be many factors that can affect the value. The best answer is to use the services of a professional that values businesses to decide a fair market price. They will know how to properly value your business.

Question: How long will it take to sell?

Answer: Unlike a house that can sell in the first 30 days, often businesses can take up to a year or more to sell. Finding the ideal buyer takes time and choosing the wrong buyer can leave you wishing you never sold the business in the first place. It is well worth the time to find the right buyer and only sell when there is a qualified buyer.

Question: Who should I tell I am considering selling?

Answer: Although it might be tempting to tell everyone you are wanting to sell, doing so could make your business unsellable. Some vendors, competitors and employees may react poorly to your decision and could actually put you out of business.

Confidentiality is a must for selling a business. It best to only discuss your interest in selling with a qualified business broker that can confidentially market your business without tipping off everyone you are selling, hence preserving the integrity of your business and its sale-ability.

Question: What is the best way to find a buyer?

Answer: Depending on the business, the best marketing techniques are often through the internet, direct mailers, cold calls, ads in industry publications or a combination. A marketing savvy business broker can target the ideal buyer and have the phone ringing with buyers in no time.

Question: Should I sell it myself?

Answer: If you have a business with revenue less than $100,000 per year you might want to consider selling it yourself. When you do find a buyer, if you need help with the process, some business brokers provide consulting services to guide you through the sales process for a flat fee.

End of Year Tips to Prepare Your Business For Sale

Often small business owners don’t realize that a buyer for their business will want to see three to five years of past tax returns when they buy the business. Many businesses decide they want to sell, but sadly their books will not support the price they want for the business.

So to help you get the most for your business when you do decide to sell (whether it is next year or 10 years), use these helpful tips:

Clean” the books

Typically your accountant will show you how to minimize your tax liability and this will also decrease your profit and the value of your business. When you start considering to sell your business, you want to maximize the profits and this will maximize the value of the business. So if you are considering selling in the next three to five years, now is the time to take out the extra expenses.

For example you might want to remove from your books any non-essential expenses – like a family trip to France to order product. Although this may be a legitimate tax write – off this little trip may drop your profits by $10- $15k and hence drop your value by as much as $45k or more.

Also, if you have a cash business, put the cash in the business. It might be too late this year, but make a New Year’s Resolution, to put ALL the cash you generate in the business. This will increase your revenues and your profits.

The new buyer will always pay you far more than the savings you will net from the IRS.

Increase revenues

Since the value of your business is heavily weighted on revenues and profit, amp up the marketing, especially for retail in this buying season. A well implemented marketing plan can drastically increase your businesses worth and help you top dollar when you sell. And remember you need three years of numbers for the buyers, so start early. It is better to have four or five years of great numbers than to only have one year!

Now when amp up your marketing and sales, there are few things to consider:

If you can capture your customer’s contact information, this worth more to a new buyer. So if you can and if appropriate, collect your customers contact information like email address and home address. If you can also get birthday or other important dates, this will impress the new buyer.

Avoid Daily Deals. It might be tempting to try a Groupon or other daily deal site to ramp up your traffic, but this is a dangerous double edge sward. The buyer can see this as a huge risk and deals have been “killed” over daily deals. My recommendation is to avoid them. If not implemented properly, they cost you much more money than you make.

Hire a professional. If marketing or sales is not your expertise, hire a professional. There are several marketing consultants and sales Consultants in Jacksonville. With fresh ideas and a sales and marketing plan, your business can grow and drastically increase in value.

Consult with a Business Broker

Although you might not be thinking about selling for a few years, consulting with a business broker early will help you understand what business buyer wants and help you know what to do to maximize your businesses value. Since your business is likely the largest part of your retirement, having a business valuation done early will allow you to see how your business is valued and manage its value.

When Is The Best Time to Sell a Business: Age or Market Based?

Deciding when to sell your business is not a straight forward process. A business owner might say, “When I am 65, I will retire and sell the business.” Sadly, there are many business owners that never make it to 65 and have to sell their company long before they or their business are ready.

Age-Based Selling

Basing your decision on selling when you are a certain age can drastically affect the price that you get for the business.

Consider this scenario. A small business owner decided she wanted to sell after 30 years of working her business. Sadly, at 25 years, she had health issues and struggled to work in her business for the next 5 years. Slowly the revenues declined as she physically could not lead the business and her desire to run the business waned. Sadly, at the 30 year mark, her business had a very little value and ended up just closing the business after 30 years.

Had she planned for her exit, she would have seen the signs and decided to sell after 25 years instead of waiting till 30 years when the business had no value.

Unfortunately, no one knows what will happen tomorrow and having a plan for selling will allow you to make a quick decision to sell before a company is out of business.

A Plan for Selling Your Business

In order to maximize the sales price of your business, here are 5 things you can do to prepare.

Decide what “triggers” you to sell? Every business has a life cycle. Ideally to sell your business for the highest price, you will want to sell when the business is at the peak of its life cycle. This is often when business owners say, “I am making more money that I have ever made.” It is also the time when most owners are loving their businesses the most. This is the time to sell that will maximize the selling price. If building your business to sell for the maximum price is important to you, then you might consider this strategy.

Triggers that show you are at the peak of the life cycle include:

  • Few competitors
  • Thriving economic market
  • Highest profits
  • Fast growth

Prepare your business as if you were going to sell tomorrow. Once you recognize the trigger and decide to sell, you will need three to five years of tax returns. If you have not been keeping “clean” books you do not have time to clean them up. By “clean” books I mean removing all non-essential write-offs, like the family trip to France every year to order new products. This can lower the value of your business and to maximize your selling price, this needs to be removed.

This also means, have a growth plan and active marketing plan, all things buyers want to see, as well as secure your top employees. If you know we will sell, put retention plans in place so that your top talent will be staying with the business.

Consulting with a business broker early on can better prepare you for how to prepare your business for selling.

Actively watch the market environment to spot indicators to sell. Many business missed the “peak: back in 2007 and watched the value of their business decline through the Great Recession. Determine which factors will indicate to you the peak and actively look for the indicators. Holding on too long will reduce the value of your business and reduce your net.

Although no one can really know when the best time to sell will be, following these simple steps and you can be more ready when you do decide to sell your small business.