Whatever your reasons may be, selling your business can be a stressful and complicated series of steps and even the most prepared owners may encounter hard choices along the way. There’s a lot to take into account such as the current market, buyer unpredictability and legal implications. Where do you even start, and what’s the best way to go about things?
As a seller, you’ll naturally want to get the best possible deal for your business, so we’ve put together the following tips to help you make the process easier for yourself, and to get the most from your hard work.
Reasons you might be selling
Everyone has their reasons as to why they are selling their business, such as:
Retirement – Whether its age or family commitments, retirement is one of the most common reasons for selling a business. Not only will it free up a significant amount of time, it will provide the funds needed to live comfortably in the years that follow. You would basically be in a position to not work anymore.
Lack of challenge – For many entrepreneurs, the thrill of setting up and building a business is often more exciting than the prospect of running it forever. If the stimulation and motivation aren’t there anymore, it could be a sign to move onto new opportunities.
Health and wellbeing – Running a business can be very rewarding, but stressful as well. In cases where the pressure becomes too much or your health starts to be affected, selling a business may be the best option to take.
The market changes – Sometimes, business sales are driven by purely economic reasons instead of personal ones. You may begin to notice the value of your product dropping, or that it is in high demand, prompting you to sell it on to get the best deal possible. To increase your chances of good market timing, read our article on the Signs That Your Business is Ready to Grow.
You need to expand – When a business reaches a certain size, new challenges come to light. You may suddenly face issues around fulfilment, supply chains or even office space. In some cases, a business can reach a certain point where it’s better to sell to a larger entity who has the frameworks in place to manage the increased needs.
How to improve your selling experience
1. Start as early as possible
If the need to sell isn’t too sudden or you don’t have a hard deadline, being prepared for the journey is the best way to start. Ideally, you’ll want to start preparing a year or more beforehand so that you can get all of your financials in order and build up the company to be as valuable as possible for when the time comes.
2. Know your business
When you decide to present your business to potential sellers, you’ll need to know all of your numbers and justify them to potential sellers, as well as being able to answer any questions about the daily and long-term operations. Buyers will want to know everything about what they are buying and if there are any grey areas, they may end up passing on the opportunity.
3. Keep good records
Similarly to the above point, good record-keeping is essential, especially in the time before selling. A buyer is unlikely to take you at your word, so make sure that you have all the necessary information in order, such as bank statements, invoices, tax returns, bills and so on. By having all of these up to date and on hand, you’ll find buyers to be a lot more receptive.
4. Have your business valued by a professional
What you think your business is worth may greatly differ from what the buyers may think. To get a more objective method of valuation, hire a professional who’ll be able to look at it through the right lens. Not only will they find out the true value of your business for a better negotiation platform, but it’ll also minimise your risk of underselling. For more information on valuation, read our article, Five Ways to Maximise Your Business Valuation.
5. Time things right
The economy and wider market will always be volatile, but you can still take a few steps to make sure that you’re selling at the right time. Keep up to date on all economy-related news, look at the successes of similar business sales and get a good general idea of the overall climate.
6. Control the narrative
If you plan to sell your business, odds are that word will eventually get out. You’ll have to answer a lot of questions around your motives, so make sure that you have a good narrative to present. Without a positive backstory around your potential sale, people will naturally assume that you are in some kind of financial trouble. Speak directly to your prospective market and put out a positive story in relevant press to pre-empt any negative rumours that may impact your final selling price.
7. Hire the right help
Selling a business has a lot of moving parts and will require different experts to help you navigate the path as smoothly as possible. Brokers and lawyers will have your best interests in mind, as they will likely take payment as a percentage of the final selling price. You may be tempted to tackle it all by yourself to save money, but if this is your first sale you’ll be much better off with the proper support. As part of this, if the business is in need of some help to be an attractive prospect, talk to us about the Business Turnaround service, designed to help you get back on your feet before taking the next steps.
8. Increase your customer base
If you only have a couple of clients, potential buyers may be nervous about the long-term viability of retaining them as the sole means of income. If you do plan to sell in the future, start building up your portfolio of clients to create a more stable revenue stream. The idea here is not to artificially inflate the value of your company, but to genuinely diversify the customer base to make the sale more attractive.
9. Know your buyer
If you do generate interest for your business or even have a prospective buyer on the table, do your homework before going too far down the path with them. You’ll want to make sure that they have the funds to buy the business, so don’t be afraid to request some sort of proof. If the buyer is having to take a loan out to buy your business, this may mean that you’ll have to wait longer for the sale. Also, if the reputation of your business is important to you, even after it belongs to someone else, considering finding out more about what the buyer intends to do with it.
10 .Protect your data
If you’re talking to a buyer, you should remain protective of your data, such as financial records until they sign a non-disclosure agreement. Make sure that the buyer is serious about acquiring your business and aren’t just doing research or digging data for their own gain.
11. Be patient
Selling a business is a complex process that may end up taking more time than you thought. If you work in a niche or complicated market, it may take longer still. It’s important to ensure that you have followed all the selling steps in the proper way and are 100% comfortable with the arrangement. Although you might be keen to sell up sooner rather than later, having the correct valuation, timing and buyer will help you avoid regretting the transaction afterwards.
Taking your first steps
The world of business selling may seem daunting at first, but the same principles of any transaction still apply: Do your homework, know your worth and take your time.
As mentioned above, we strongly recommend consulting or working with experts in the field who will help you navigate the various steps to selling success. To get the ball rolling, get in touch with our helpful team who will be able to advise and guide you on your individual goals.