Selling business needs a very careful planning and strategy. Many efforts should be done to get a high price. Not only buyers who are investigating, the smart sellers are usually coming to see the conditions, asking the realistic price, and seeking the potential of the business before they sit down and try to negotiate.
When you think that you can no longer run your business and if you’re thinking of selling your business, here are some ways to consider of how to sell a business.
7 Mistakes to Avoid When Selling Your Small Business
1. Set the value of your business
Small businesses usually are counted worth three to six times of the cash flow in a year. But it all depends on some conditions of the company, such as the financial health, industry trends, market demand, location and also some other factors.
The review is usually based on the sales and the receivables, inventories, and some other properties owned by the company. Other considerations are about the debt or loans which lead to the analysis of threats and opportunities that may affect the value of the company.
Also Read: How to Start a Catering Business From Home
There are different types of approach used by the expert of how to value a business to sell. And they will have different result as well in valuing a business. And the analysis based on the approach done by the buyers may have big effect for to make the purchase decision.
2. Finish the company financial affairs
Any prospective buyers will love the transparency of the company condition, especially the financial condition. The owner of a company may work with an accountant to be able to present the rigid report of the financial condition of the company dating back at least three years, and make sure that the income is included. In the way of how to sell a business presenting the company financial condition is important since the buyers would easily see the real condition of the company they would like to buy. This financial report is usually the main consideration of the buyers before they make the purchase decision.
Make sure you create a precise report of the financial condition. Do not do any mark–up or any hidden agenda for this case. It is crucial. Be honest and open for the condition.
The prospective buyers will give you the respect for this. They will give their trust to you if you are being open for the real condition.
3. Prepare the exit strategy
Starting business is not easy. Running the business and make it survive in the market place is even harder. Some reasons may force you to make a very hard decision. When the condition of your company is helpless, and you go almost bankrupt, selling the company would be the last choice you have.
And so, you always need an exit strategy when your company is going down.
There are many factors that finally force small businesses to surrender and end up sold. The aging or ill owner is among the reasons why. And he or she doesn’t have any offspring who would likely take over or continue to run the business.
One of the most popular strategies is that having a trusted employee to take over the business. But, this plan needs a long term preparation. It isn’t easy to find a well-trusted employee to be handed a company. You need to build a very close relationship with your employee. Carefully analyze and understand well their characters.
Then, when the time comes you have to decide whether he or she is capable enough to be bestowed with a company. And when it didn’t work, then, you need a plan of how to sell a business.
4. Boost your sales
Remember that in the steps of how to sell a business you need a very careful plan to get a high price for your company. Don’t get tempted with the clause of how to sell a business fast.
Analyze the financial conditions of your company, when the sales in your company are raising, and you consider selling your company, then it is the right moment to sell it. When the sales are declining, that’s not when to sell.
Be very careful in making the decisions. Some buyers may want to see your company with some upsides. They don’t like to see your company in downsides. It won’t be an interesting moment for buyers to buy the company.
5. Get the help from the broker
You may be a very good business man, but not the best man in sales. And that makes sense for you to get the help from the expert to help you sell your company.
The broker usually helps you in these ways:
- Valuing your company
- Prepare the selling prospects
- Finding the buyers for you
- Listing the business which fits its marketplace
- Making the deal to get the best price
- Persuading the buyers to be the finance resource for the company
The hardest part is how to get the deal for the best price in this case. The broker may ask you a commission for 5 to 10 percent of the sale price when the deal is achieved.
6. Pre-qualify your buyers
The main reason why the deals fall through is because the buyers do not have quite strong financial condition. Don’t be too overwhelming by a great offer from a buyer. Don’t be easily tempted by the phrase of how to sell a small business fast. Take a look at closely to the buyers to be and their financial condition. Don’t easily let your company go to the unfit side.
Some expert also said that the new owner of the company must fit company culture. You may also need to consider about this suggestion.
7. Get business contracts in order
In how to sell a business this step is among the important steps. You and your buyer need to arrange the purchase agreement. The written agreement on the purchase of business assets, including the physical assets and intellectual assets are urgently needed.
And that’s all to sum up this article of how to sell a business.