Thinking About Selling Your Business? Get Prepared

May 31, 2012 by Mina Singson-Brightman

If you are thinking about selling your business, then preparation is the key to getting the best possible selling price at the best terms.

How soon do I need to prepare to sell my business?
Having a good exit strategy in your business plan is prudent. Successful businesses keep a current business plan on file all the time, which includes a great exit strategy. This may not be a priority for new entrepreneurs, or owners of flourishing businesses but keep in mind that an exit strategy is just as good as an expansion strategy. Investors, banks and other sources of growth funds will look at the same information that the buyers review.

An exit strategy emphasizes those elements of a business that constitute value to the market. By having an exit plan in place and in mind, a smart business owner will naturally focus on the growth of their business.

So to answer the question, how soon do I need to prepare to sell my business? The answer is, NOW.

Where do I begin?
When your business is on the market for sale, qualified buyers with Non Disclosure Agreements will ask for historical records including (but are not limited to) tax returns, profit and loss statements, sales receipts/collections, asset information, customer account longevity, etc. Owners with easily verifiable data to present to a buyer tend to sell their businesses faster and at a better price. Plus, good books and records are essential in getting business acquisition financing from a lender, such as an SBA loan. Therefore, keep an organized file of important documents from the last 2-4 years.

How do I Increase the Value of my Business?
- Sustain or increase sales
Remember that one of the most valuable asset of the business is the goodwill. Owners can sometimes get distracted when they are thinking about selling the business. However, it is important to remain focused in finding, servicing and retaining clients during this process.

- Operate a Self-Sustaining Business
Train your management team and create a system for the company so the business will be less dependent on you. A buyer finds an owner-absentee or semi-owner absentee business more attractive than a business where the owner is critical in the daily functions. If the owner is the only key decision-maker, the value of the business will be limited without the owner. And the buyer may feel that the business they are taking over will not succeed without the current owner.

At what point do I put my business up for sale?
If you are burnt out, get out. If at some point you are feeling that you no longer have the energy or are beginning to lose the passion, it may be the time to put the business up for sale. Otherwise, it will likely be mismanaged and will decline in value. Besides, it takes an average of 6-9 months to sell a business.

For owners who hesitate and ask, why shall I sell my business if it is successful? Because buyers will pay more for a growing business than a business in decline.

I am ready to sell my business, what’s next?
Get professional advice and assistance. As they say, the attorney who represents himself has a fool for a client. The same applies for an owner who tries to negotiate the sale of their own business. An experienced advisor can guide sellers in the valuation of the business, marketing, and the screening of potential buyers. They can help in organizing the information that buyers and lenders typically require when they are evaluating the business.

While you may think you can get more money selling the business on your own, without a competent business consultant or business broker, you may actually decrease the overall sale price of your business.

For a free expert evaluation, contact Mina Singson at 310-882-2200 x 125 or msingson@bizex.net.
https://www.bizex.net/business-broker/mina-singson

Business Sales Process, How to Sell, Business Valuation