According to the SBA, 52% of small businesses are operating from a home based office. If you own a home based business this high percentage rate is good news for you. It means that owning this type of business has become a popular choice for many entrepreneurs and as a result, if you want to sell your home business, there is a market looking to buy it!
Unlike a traditional brick and mortar business, selling a home business requires a little more finesse on the part of the seller. You really need to do your due diligence and prepare the business to be sold in order to make it attractive to a potential buyer. Selling a profitable home based business can lead to a nice return for an owner so here are my tips to achieving a successful sale.
1. Make Sure The Business Operates Like A Business
As an entrepreneur running a home business, in most cases, you don't have a boss or anyone holding you accountable. For some people, this lack of accountability leads to sloppy operations. It can be easy to get wrapped up in the day to day operations and let back end work slide. The same is true for any small business, home based or not.
When you are planning to sell you need to make sure that your business is operating as a business should. Ideally someone should be able to step in and pick up right where you left off without missing a beat and grow the business. To prepare for a sale, make sure you can compile clear financial reports that project the financial state of your company. Also be sure that you have all your important paperwork in one place because just like the sale of a traditional business, you'll need to present buyers with a packet of information about your company.
2. Document As Much As You Can
Along with your financials and other company information, I would also suggest compiling some sort of procedure or operations manual. Depending on the nature of your business this may not be a big undertaking just put something on paper that details to potential buyers how your company is operating. Tell them information like how you are finding clients and what the process is once you have one. Do you enter them in a database? Then what? Talk about accounting procedures and detail your billing process. The idea behind a document like this is to provide a set of instructions that would help a new owner step in and take over in your absence.
3. Consult With A Professional Business Broker Or Agent
If you are considering selling your home business, I highly recommend you consult with a professional business broker prior to listing the business for sale. As I said earlier, selling a home business is a little more difficult than selling a traditional brick and mortar business especially if it is a one-person operation. In a situation like this, finding a buyer that has the skill set to take over as well as the ability to run the business side of things is crucial.
Additionally, pricing a home based small business appropriately is going to take some expertise. A professional business broker will be critical in helping you determine a fair asking price that will get your business sold in a timely manner. This is not a task you should try to take on yourself.
4. Offer Business Purchase Financing
In addition to all I've mentioned above, also consider offering some sort of business purchase financing to buyers. Not only is this becoming more common place among businesses that are being sold but many lending institutions are looking for it as a part of a sales agreement. They want to see that the owner has some skin in the game and by offering to hold a portion of the note you are telling lenders that you believe the new owner has what it takes to successfully run the business. Doing this can help the buyer secure financing through a lender and ensure that your sale makes it to closing.
5. Look To Your Colleagues
Because selling a home business is going to require just the right buyer, I recommend you take an active role in the sales process by not only working with a professional business broker but also by reaching out to your colleagues. They may know someone interested in your business or if your industries are related, they may be interested in buying it themselves. If you do discuss the opportunity with anyone, be sure to get them to sign an NDA to protect the confidentiality of your sale.
About The Author: Peter Siegel, MBA is the Founder (of BizBen.com) & the Director Of the BizBen California Network (founded in 1994!) consisting of business buyers, owner/sellers, business brokers, agents, intermediaries, and advisors (there are over 90,000 users, and 8,000+ listings posted on BizBen.com). To join (FREE) the BizBen California Network, phone Peter Siegel direct at 866-270-6278 - get signed up for business for sale listings (Email Alerts) before they hit the market, view requests from serious business buyers - wanted notices, notices about upcoming FREE online webinars on the topic of buying and selling California small and mid-sized businesses and much more! Call 866-270-6278 to get info about small businesses for sale in your area.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers
I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.
|Brad Steinberg, Broker - Laundromat Specialists
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
|Helen Yoo: Escrow & Bulk Sale Services - Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
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