Selling your business? Follow these steps cause you’re in for a ride
After spending years building, scaling and running their venture, there may arrive a point where some small business owner has to come to terms with the sale of their enterprise. This could be due to a myriad of reasons like retirement, being overburdened with stress, financial insecurity, etc. Whatever the case may be, selling a business is not exactly a simple process. One needs to go through several time-consuming steps, sometimes with the assistance of an attorney, accountant, or broker. It can appear daunting at first, just like starting a business can too, but it isn't necessarily so.
Here are some basic steps that the sale of a small business entails:
Determining the worth of your business is the first step you need to take if you're planning to sell. And it's vital that you get it right. Set it too high and you won't get a buyer, set it too low and you'll feel cheated. There are several individuals and consultancies that perform business valuations, so reach out to one and they'll present you with a valuation along with a comprehensive breakdown. This will lend credibility when you quote your price to potential buyers.
Start early in your search for a buyer, preferably a year or two before you want the sale to happen. It can take a while to land a buyer and you don't want to be forced into accepting a less-than-ideal offer because of a time crunch. Also, ensure your business is in the pink when you're trying to negotiate its sale, so that you earn the highest possible price for it.
The middle man
If running your business doesn't leave you with enough time to scout for potential buyers, you should use a broker to ease the sale process. For obvious reasons, make sure whoever you're hiring is reputable and trustworthy. If you do decide to go at it alone, then put out a listing and use your connections to find potential buyers. Talk to people in your industry, they will be your best bet at finding interested parties.
Prepare a comprehensive collection of all important documents pertaining to your business. This includes income statements, tax returns, inventory, vendor contacts, property leases, equipment purchases and anything else that's relevant. Potential buyers will undoubtedly conduct their own review but it's always handy to have all this information ready on your end. You can also prepare a brief about how your business operates to make it easy for the buyer to learn the ropes.
Making the sale
Research your buyer, to see if she/he has the financial resources to follow through with the deal. Also, keep a couple more potential buyers as backup in case the deal falls apart. Once that's done, hire a lawyer or accountant to work out the finer details of the deal and draw up a contract. Always put agreements in writing, especially if there are non-disclosure agreements or patents involved. And try to get the sale processed in escrow to minimise your risk.
Unless you sold your business to clear outstanding debts, you'll find your bank account considerably richer once the sale goes through. When that happens, don't be tempted to spend it in a hurry. Take into consideration the taxes you may have to pay on the sudden wealth. Think about your long-term financial goals and zero-in on the appropriate investment option. With the right investments, you may be able to comfortably retire from the sale.
If you ever feel overwhelmed by the selling process at any point, just remember the reason why you're doing it and the large sum of money that awaits you at the end of it all.