When it is time to sell your business, its preparation plays an important role. Proper preparation of the business for sale greatly affects the final result of the transaction. After all, the final amount depends on the quality and ability of the seller to present his company. And it can differ significantly from the expected, both up and down. Therefore, in order to get the maximum profit from the transaction, let’s look at what to consider when selling a business.
Things to consider when selling a business?
In order to sell your business safely WebSite Closers advises you to follow simple rules and avoid mistakes that 90% of sellers and buyers without experience in such transactions make.
Checklist for a safe transaction
– Study the procedure of selling or buying and delve into the main nuances of the transaction.
– To carry out the agreement renegotiation process correctly.
– Check the business for debts before buying and communicate with the landlord about this.
– Officially keep records of business profits and generate documents confirming business profits since its foundation.
– Optionally, you can cooperate with private brokers and companies, however, only after a thorough selection of the applicants!
– Talk to people in your community who have made such deals before and find out what challenges they encountered.
– Do not be afraid to ask any questions to the owner or buyer, because the outcome of the transaction depends on it.
– Get the support of an expert in advance and, if it is possible, carry out the operation with an independent business broker, and find out all the processes during the transaction.
How to prepare to sell your business
Step 1. Prepare a report on income and expenses
Before selling a business, you need to prepare financial statements. The main report is about income and expenses, it is abbreviated as BIE – budget of income and expenses, or PL – profit and loss statement. From the report, the business owner and the buyer must understand where the money goes and how the business earns.
Step 2. Make a list of assets and describe processes
Business is primarily about processes, so you need to describe each process in detail in an instruction or manual. These can be processes for purchasing flowers, pricing, hiring and firing employees, and scripts for sellers. The buyer must understand what to do when and how to do it so that the business continues to bring money. If someone leaves the team, the new owner should take the described processes and pass them on to another employee, and not figure it out himself.
Step 3. Deal with inventory balances
If the business is built on the sale of goods, there will be inventory. It is better if there are fewer of them, then there will be no question of valuation. But it is not worth arranging a sale to increase revenue and then the value of the business – it is misleading the buyer.
Step 4. Determine the price of the business
A commodity business – one that earns on the sale of goods – is usually sold on the market for 12 net profits, which means that the deal will pay off in a year.
Considerations when selling your business: top questions
1. How to know when to sell a business?
The reasons for selling a business can be different. The main thing, in this case, is to honestly answer the following questions: whether your company is able to continue to generate the same margin, whether you are passionate about what you do, and whether you are sure that you want to sell. And if you do, don’t drag it out.
2. How do I sell my company?
You can find a buyer for almost any asset. Strategic investors are interested in the potential for synergy with existing assets, for investors in distressed assets – the potential to increase the value of the company, and for others – profit. A very good impression on buyers is made by vendor due diligence – pre-sale risk assessment of the company by an independent consultant. It shows the good faith of the seller and gives him an understanding that can reduce the price during negotiations.
3. Where to sell my business?
To sell a business you need either connections or intermediaries and preferably both. It is possible to find a customer using your friends or to offer your company to competitors who want to increase their business. In this situation, you need to ensure confidentiality: a competitor can find out about the state of the company and all your “chips”, and then decline the purchase.
Sometimes ads for the sale of the company are placed on specialized forums, where there are chances to find a savvy and interested buyer. If you cannot sell the company yourself, business brokers are a good option. They select objects, evaluate them and accompany the sale transaction, receiving a percentage for it.
Selling a business is a difficult but noble business. After all, you sell what you have created with your own hands over years of hard work, investing your energy, mind, experience, and strength in a new business. It remains only to the sincere hope that your work will be appreciated and will bring you a lot of money.
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