There are many factors that might compel you to sell your business. Whatever your reasons are, it’s crucial to ensure you get the maximum gains from your sale. This translates to selling well and selling right.
Here are a few key factors to consider when making the major decision to sell:
How much is your business worth?
Overvaluing or undervaluing your business is very detrimental to the process of selling a business. To curb this, you should consider hiring an external auditor, business brokeror accountant to conduct a business valuation. They will apply all available metrics from using your company financials to market trends to give you a final figure concerning the financial health of your business to determine the current market value of your business.
Sell at the right time
There are many aspects to time when selling a business. To begin with, the right time is when the market is right, when you are bound to make the most profit out of it. The other good time to make a sale is when you want to make a lifestyle or professional change.
Due diligence on the buyer
Your business is only worth letting go if the buyer is right. Think of your business as a child being left with someone to mind them. You would only leave your child with someone who will take proper care of them, right? The same applies for business. Be sure that the person you are selling your business to has the same vision for it as you did.
Information is power
You should have enough information at your disposal to answer any questions that may arise from different quarters. This could be yourself, your potential buyers, and especially your employees. If you have been operating your business for a long time, you will have established a routine and a familiarity with not just your business but also your employees. Do you have an exit strategy for your employees/ can you comfortably compensate them? Is the new business owner willing to retain your employees too? You should be able to respond accurately to your potential buyers when they ask any questions while conducting their own due diligence on your business.
Be able to defend your price
You may have your books of account and therefore numbers in order, but do you have the right information as your arsenal when defending your asking piece? A potential buyer will definitely counter with a lower price, at which point you should be able to convince them on how you arrived at your price, and what they stand to gain form purchasing your business. This subtly translates to having clean, accurate and verifiable financial records which boost the credibility in your business’s valuation. Remember, while factors like market trends can be argued upon, numbers are numbers and having proper records will back you up on asking price.
Are your books of account in order?
One of the best ways to know if your business is worth selling is by examining your numbers. This entails a thorough look at your income statement, cash flow statement, balance sheet, several previous years’ tax returns, and even seller’s discretionary earnings (SDE). Most buyers will want to assess these records before engaging you on a sale. This is the easiest you to determine if a sale is a go or not. There are steps on when to allow a buyer access to those records, and a misstep could cost you the business.
Selling your business is a personal decision, but as you can see, the decision is governed by a host of other considerations. Once you have all these in place, the decision and actual process of disposing your business will begin to make sense!