The idea of selling your business can be stressful and emotional. As a business owner myself, I can sympathize with someone who is selling their business because I know how much time and effort goes into owning a company. Business owners choose to sell their business for many reasons, maybe they want to retire, maybe the business isn't producing the profits they need in order to live off of it, or maybe it's just time to move on. Whatever the reason, here are a few tips on how to sell your business.
Before you list your business for sale and officially put it on the market there are several things you should do to prepare for potential buyers. In my experience, I've seen businesses receive inquiries the day they are put on the market so make sure you've done the necessary prep work.
Clean and Repair
Cleanliness is so important. Depending on the business, cleanliness is somewhat subjective. If you are selling your car repair business, it won't need to be nearly as clean as someone looking to sell their restaurant or salon, but regardless of the industry, make sure the facility is as clean as possible. Hire a professional to come in and give it a thorough cleaning if you don't have time. The cost will pay for itself in the long run.
As you are doing a thorough cleaning keep an eye out for repairs that can be made to improve the overall appearance of the business. You want to identify small items that can have a big impact like painting, changing hardware, light fixtures, minor redecorating, things that are relatively in-expensive that can have a large impact. Look at the first place your potential buyer will see as they enter your facility and make sure it's top notch. You only get one chance to make a first impression.
Staff and Your Exit Strategy
If you haven't already, now is the time to think about your exit strategy specifically as it pertains to your staff. Consider whether or not you want to tell your staff about your plans to sell your business. They may see potential buyers coming in and out, and you may need their help in keeping the facility as clean as possible throughout the sales process so telling them upfront may be beneficial to you.
Additionally when it comes to your staff, be sure that someone can do your job. When potential buyers are looking at your business, it will be more attractive if another staff member can step in once you've left. In my experience, having a solid exit strategy is just as important as finding the right buyer as you want to leave your business in a healthy position. If a buyer sees the company will remain stable in your absence, it will be all the more attractive to them
Take some time to gather all the proper paperwork. Potential buyers are not only going to want to look at your facility but all your important documents such as:
"¢ Your tax returns for the last three to five years
"¢ Your P & Ls
"¢ Your balance sheets for the last three to five years
"¢ Bank statements
"¢ Current lease information (make sure to check and see what is transferable and what is not)
"¢ Insurance information as well as your licenses and permits
"¢ A list of furniture and equipment
"¢ Any vendor agreements
Consider a Broker
Once you have done all this, my recommendation would be to consider working with a broker. If you don't, it's basically like trying to sell your home on your own. In my experience, the "for sale by owner" sign doesn't usually get as much exposure as a broker with marketing experience will, so if you are really looking to sell your business, a broker is the best way to bring it to market and get it sold!
A business broker can do a number of things for you and can help make this process less stressful as they have done it all before. Not only can a broker help you find a buyer but they may also be able to assist you with your exit strategy. BizBen.com works with a lot of brokers, so for starters, I suggest you visit the site and take a look around. You'll find some resources to get your search started. Ask your professional contacts for referrals and contact local resources like the Chamber of Commerce, business development organizations and other agencies geared toward the business community can also be resources for you. This is an important part of how to sell your business, because if you select the wrong broker, your business may sit on the market for months!
With your broker's help, establish your selling price. When selling your business remember that there are usually two prices, one is the asking price which is what you, the seller, would like to get for the business. The second is the selling price which is what the seller receives. Somewhere in between is the Fair Market Value, which is the highest price the buyer is willing to pay and the lowest price the seller is willing to accept. There is no formula for figuring this out. Each business needs to be considered on an individual basis. There are, however, certain benchmarks and valuation approaches and methods that enable an experienced appraiser to determine the most probable price for the business. Having your business priced appropriately will make it more attractive to a potential buyer.
In my experience, I've found that it can take three months or more for a business to sell. Once it is on the market you have to be patient and wait for the right buyer to come along. Working with the right broker can help expedite the process so clean up your business, choose the right broker and sell your business!
About This Contributor: Peter Siegel, MBA is the Founder & Senior Advisor (ProBuy & ProSell Programs) at BizBen.com (established 1994, 8000+ California businesses for sale, 500 new & refreshed postings/posts daily) working with buyers, owners/sellers, brokers, agents, investors, and advisors). Reach him direct at 866-270-6278 or 888-212-4747 to discuss strategies regarding buying, selling, (or financing a puchase of) California businesses.
Categories: BizBen Blog Contributor, How To Sell A Business, Selling A Business
Comments Regarding This Blog Post
In addition to all these good points, a seller should go through a comprehensive "disclosure list" with their business broker. These are items that a prudent buyer is going to want to know eventually anyway, and it pays for the seller to get out ahead, and correct anything that could be a problem. I use a 3-page checklist of over 60 items--about regulations, litigation, safety and environmental issues, latent financial obligations, employees, insurance claims, etc., etc. We analyze potential problems and pro-actively take care of them long before we get to the due diligence stage. It can be the difference between a business selling or not selling.
These are all great points, Peter. Another thing a broker and seller should agree early on in regards to price is if the seller wants all-cash or is willing to carry a note. All cash is preferred by many sellers, but in an environment where availability to cash and loans are getting more difficult to access, it can mean a lower price for the seller, but less headache after the business is sold. A seller who is willing to carry a note, can cast a wider net in regards to potential buyers, but of course that note needs to be serviced after the business has sold.