When an entrepreneur starts a business and becomes a business owner, they are often not thinking in terms of what's the best way to sell a business? from the very start. However, building a strategic exit into your business plan is the best way to address this question and prepare for an exit. In this discussion, we’ve described three ways business owners can prepare for an eventual sale so that when the time comes they have positioned their business well.
Have a Plan. Having a plan can mean a lot of things. If you would like to retire at 60, your plan should include preparing your business for sale the 3-5 years prior. Preparations can include conducting a process gap analysis and documenting all missing processes. You may also like to hire and train a manager to take over all of your daily tasks, so that by the time you list your business for sale, you are only involved in business strategy. Addressing all of your contracts when they come up for renewal and making sure they are assignable will situate your business well. Finally, you could work on reputation management and making sure your have great business reviews and a robust online presence.
Hire a Broker. This step, though it may sound self serving, is important. Business brokers have access to the market knowledge, the confidentiality processes, the buyers, finance professionals, attorneys, and the large network necessary to get your business sold. Selling a business is a huge time commitment and if you’re worried about the best way to sell a business, than avoiding taking it on yourself is a good way to ensure your business is not negatively affected by your focus being elsewhere. Also consider that it takes time to sell a business, typically 9 months to a year, so engage your broker early on so you can exit your business on time with your plan.
Be Realistic. It is important to set realistic expectations for the sale of your business especially in regards to the price you can achieve and the time it takes to sell. With regard to price, a business is only worth what a buyer is willing to pay. Typically, small businesses trade at 2 times the sellers discretionary earnings (SDE). But depending on the market, the size of your business, and the industry it may trade for more, and it may also trade for less. Pricing your business to sell from the very start is a great best practice in business sales. It is also important to give your business time to sell. While business brokers have access to buyers and valuable market connections, it will still take time to market the business and connect with buyers to ultimately introduce you to a highly qualified buyer. Try to be patient with the process and voice any and all concerns with your broker so they can support you along the way.
If you would like to discuss the best way to sell a business with a professional business broker, schedule a free consultation or visit our website for more information.
Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle!