Selling a business is never a simple or an easy process, however, the rewards can be amazing – and in some cases, even life-changing. If you’ve been running a business for a while and have decided that it’s time to retire or move on to something else, you might be thinking about selling your company on. If you do decide to sell, there are some key factors that you will need to be aware of, so that you can best prepare for the process and maximize your chance of success. When it comes to selling a business, mistakes made in the early stages could lead to wasted months and missed opportunities when it comes to a sale, so it’s important to do thorough research and know exactly what you are getting into. Here’s what to consider if you want to sell your business.
#1. Potential Doesn’t Sell Better:
Bear in mind that if a buyer was interested in starting their own business from scratch, there are several ways in which they could do just that without purchasing your company. Many small business owners make the mistake of thinking that when a brand isn’t doing great just yet but has a lot of potential will sell better – it won’t. Most of the time, buyers want to spend their money on a proven brand – so if yours hasn’t proven itself yet, expect to take a pay cut.
#2. Profit is the Most Important Factor:
Another common myth that small business owners believe when trying to sell is that buyers are interested in revenue figures. Although they may want to be informed of them, however, the main factor that buyers will want to know more about is how much profit your business is bringing in, and how much it can be expected to make them if they decide to buy it. Sure, revenue figures can sound good, but don’t try to use them to cover up a poor profit – experienced business buyers will see right through it.
#3. Don’t Focus on the Past:
If your business has done well in the past but is starting to slow down today, be honest about this with buyers. Whilst it might be worth mentioning, bear in mind that the previous success of a business is mostly irrelevant at the time of sale, particularly if it is struggling in the present. Buyers tend to be interested in the most recent performance; usually from the last twelve months or less. And, they’re more interested in hearing about future viability and sustainability compared to how well your business was doing a few years ago.
#4. Honestly is the Best Policy:
An experienced business buyer will be able to see through any pretenses that a business is doing better than it really is. So, when it comes to selling your business, the best policy is to show it for what it really is. Buyers will be more appreciative of a seller who is honest with them about profit numbers, whether or not business performance has slowed down in the past few months, and just how well they think the business is doing as a whole – even if it’s not amazing. An experienced buyer will understand that every business is going to have a combination of positives and negatives and will want to hear about each one in as much detail as possible. Don’t think that mentioning the negatives is going to put a buyer off – there’s no such thing as a perfect business.
#5. Be Ready With Answers:
If you’re serious about selling your business, then you should be ready to answer all the questions that your potential buyers may have. Any experienced buyer who knows what they are doing when it comes to buying and taking over a brand will have a lot that they would like to know, so have your answers ready from the start to keep the process running as quickly and as smoothly as possible. In addition, the fact that business sales, particularly online business sales, are becoming more and more popular, you should also be ready for questions from inexperienced buyers, too – more and more people are deciding to invest in a ready-made business for the first time.
#6. Fees and Charges:
Once you’ve found somebody who’s interested in buying your business, don’t forget about the process from there onwards. Usually, there are several fees and charges involved with the selling and buying of a business – some of which you will need to be ready to cover. It’s a good idea to get legal advice beforehand so that you know exactly what to expect. The fees will vary – much like selling your home. For example, if you sold your business privately then you can expect to pay less, however, you’ll need to be ready to pay a fee if you go through a business broker. Legal fees and the fees for changing ownership will also apply – although these may be covered by the buyer. There’s more info here.
#7. Verify Your Financial Claims:
Last but not least, no experienced buyer is going to purchase your business without seeing proof of financial claims. So, be honest about how much money your business is making and have the documents there to back it up, such as deposits into your business bank account or your tax return documents for the past year. If you are unable to verify the financial claims that you make about your business and the buyer finds them untrue once they have made the purchase, you could be risking a lot of legal trouble. So, as mentioned above, it’s always best to be honest – even if your business isn’t making as much money as you’d like it to. Buyers want to know exactly what they are spending their money on; so, providing them with as much proof and documentation as possible is the best way to do this.
Selling a business is no easy task but being ready for buyers can help you get a quick sale and the asking price.