How to Successfully Sell a Business
There are several things you should know and consider before you are ready to sell a business. You may have already planned selling your business for raising funds for your future endeavors or simply as a successful exit strategy. On the other hand, the idea that you need to sell your business may come as an emotional shock or more of a surprise. In either case, you need to plan ahead if you want to do it successfully.
In business, you are in habit of selling a lot. You sell business products, services, investors, widgets, and ideas. However, selling your business will require a lot of hard work from your side so that your business is sold at the right prices. Here are a few tips, which will help you sell your business successfully:
What Are Your Business Valuations
The first thing you should find out when selling a business is what the value of your business is. If you are unaware of it, then you will be entering into a deal blindingly. This practice is highly discouraged. You must know what you are offering to the buyers if they are interested in buying your business.
Following are three ways to find out the valuations of a business:
· Asset Approach:
Determine the asset valuations of a business by adding all the assets and liabilities. This is the way to evaluate your assets.
· Income Approach:
Check the income stream of the business to estimate the value of your business. This can be done using several technical methods. However, it is not essential for you to do so in the early stages of selling your business.
· Market Approach
The market approach of any business can be found by determining the value of competitive companies in the market. Check their worth and make an estimate of how much they are selling at. You can then compare the value of your business against them and see how your company is doing in the market.
Making use of any of the above strategies, find out the valuations of your business. It is advisable to use the method that is giving you the highest value. Once you have done that, you can put your business on the market. However, it is better to first go for an accurate estimate before entering the market.
Know your Brokers
The first step for getting an accurate estimate of your business is to find the most reliable broker. Although you can try to do the estimation on your own as well, but besides being a lot of hard work, the figures may not be a perfect estimation. Moreover, the broker will also help you with the other stages of the purchasing process such as negotiations, due diligence, and finally, with the sale as well.
Be Prepared
Now that you have done your homework concerning the value of your business, there comes the next step of convincing the potential buyers about its value as well. Remember that the potential buyers will be asking you a lot of questions about your business. To sell your business successfully, you need to be prepared to answer these questions. Some of the most commonly asked questions are:
- What is the size of your business?
- What is the history of your business?
- What is the value of your business?
In addition to the above questions, they may also ask other details about your business. In order to sell a business successfully, you must be able to create appeal for and determine the value of your business in front of potential buyers.
However, the one subjective question they will definitely ask you is why you are selling your business? You should put considerable effort into preparing your answers for these questions. Even if it is a personal reason such as divorce or an obvious one such as retirement, present the answer in a manner that it will entice the buyer’s interest and remain honest in your responses.
Know your Timing
Another factor that plays an important role in determining the success of your deal is the time when you put it up for sale. Although right timings can be the difference between a huge loss or profit, there is no definite way to determine what time you should sell your business at exactly.
This chiefly depends on the nature of your industry. For example, the seasonal trends for ecommerce and real estate will be completely different. Following are some of the times when you should and should not sell a business:
When should you not sell
You should not be selling a business when:
- You are burnt out. This will mean that you will not have the determination and energy to seal a favorable deal.
- Your company is facing a catastrophe. While some buyers are interested in distressed companies, this is generally not the best time to get the most value for your enterprise.
- You are in need of cash. Although getting a lump sum amount is an attractive feature for any deal, this should not be the only motive, because this may lead to acceptance of the most profitable deal from your end, which may not be ideal for your company in the long run.
When you should sell
Selling a business is favorable when:
- You want a change in your lifestyle. These lifestyle changes include spending time with your family, enjoy your independence, and retirement.
- Your company is performing well. The best time for selling a business and getting the most out of the deal is when your company is performing better than the rest of the companies in the same industry.
- You have an excellent management team. You will be earning a lot of profit if your company has an expert management team in place. Buyers are always looking for a company with great human resource.
Selling a business is a huge decision with many huge changes attached to the process. Your lifestyle will change, you will have a large amount of cash in your account, and you will have a lot of free time on your hands as well. You can even invest the money in something further as well.
However, all of that depends on how great a deal you have made. The best way to do it is to hire the services of reliable brokers. Kirksey Business Brokers are a great option if you are looking to sell a business in Grapevine, Bedford, Euless, Mid Cities, Keller, Roanoke, Trophy Club, Southlake, Colleyville, Fort Worth, and Dallas.
Sources
http://www.compasspointcapital.com/