How to sell your small business?
There are seven easy-to-follow steps to help you get organized and ready to sell your small business.
- Determine the value of your company
- Clean up your financials
- Prepare an exit strategy
- Boost sales
- Hire a business broker
- Pre-qualify potential buyers
- Prepare a sales contract
The first step is determining the value of your business to find a competitive but accurate listing price. To do this, you will need to “clean up” your financials. In other words, balancing your balance sheets, calculating your profits versus cash flow, and the depreciation of any relevant equipment. There will come a time (after an NDA is signed) that a potential buyer will request to see your financials. You will not only want to be prepared, but also have the correct financials. A business broker and financial advisor can help you during this process.
Before you list your business for sale, you should prepare an exit strategy and boost your sales. The value comes from today and tomorrow’s sales, not yesterdays. An exit strategy means you will be prepared, regardless of whether the sale is inspired by retirement or sudden illness. If it is intentional, then you need to increase your sales in a way that makes the most sense for your business. This can be done through a new marketing strategy, like holiday discounts or social media contests, etc. Showing strong profit growth in the last two or more years of the business will make it that much more profitable and attractive to potential buyers.
Finally, a business broker will assist you in not only finding great potential buyers but also in pre-qualifying them. It is unfortunate to get excited about a buyer and then find out they cannot afford to meet the offer or secure financing. When a buyer is pre-qualified, your advisor will get contracts in order and secure a neutral meeting location to sign the paperwork and finalize the deal.
No matter what kind of small business you own, these seven steps are relevant across the board. From organizing your financials to hiring professionals who can guide you, you are one step closer to your next business venture once you have followed these steps and prepared your small business for sale!