Don’t Sell Your Business Before Doing This
Selling a business is a big deal. It’s financially, legally, personally, and emotionally complicated. If you don’t do your research on the front end, it could prove to be more harmful than beneficial. The hope is that this article will serve as a front-end resource to help you enter into the sales process with a strategic plan that sets you up for success.
4 Steps to Take Before Listing
The decision to sell your business can’t be made in a vacuum. It requires months of forethought. And in the weeks leading up to a choice like this, you’ll need to take several key steps. This includes:
1. Set Goals
As you know from building a successful business, goals are paramount in the pursuit of success. So why should the sale of your business be any different? In particular, we recommend paying attention to:
- Target price. It’s difficult to accurately evaluate your business as the owner. Your emotions, experiences, and subjective opinions will almost certainly lead to an inflated price point. Having said that, it’s a good idea to start with a target price in mind. If nothing else, this gives you an aggressive figure to reach for.
- Target sales date. Think about when you want the transaction to be complete. Is it something that needs to be done by the end of the fiscal year? Do you want things wrapped up by the time you turn a certain age so that you can start retirement?
- End outcome. What’s your end goal? Do you want to completely sell the business and wash your hands of it? Or would you prefer to stay on and work (earning a salary) for a year or two?
If you get clear on your expectations surrounding the sale of your business, you’ll enter into the process with much more clarity and conviction. This will translate into better results.
2. Get Organized
If you’re in a position to sell your business, it means you’re doing a few things right. So while you’re probably fairly organized to begin with, think about things from a buyer’s perspective. Any serious buyer will want to examine your balance sheet and books under a microscope. The same goes for contracts, loan documents, and business processes.
Details matter in the sale of a business. Take the extra time to carefully and systematically organize every aspect of your company so that there are no red flags to a prospective buyer. Appearances are everything – and people will run away at the first sign of disarray.
3. Consult With a Broker
Selling a business isn’t like selling a car. You can’t visit Kelley Blue Book, punch in a few details, and get an accurate valuation. There are so many unique factors involved. A DIY approach to the sales process will almost always come back to bite you. Instead, we recommend consulting with a business brokerage anytime you’re even remotely considering selling.
“Business owners consult a business brokerage for many reasons during early-, mid-, and late-stages of the business cycle,” Apex Business Advisors explains. “No matter where you fall, it’s a smart move to know your company’s current value and how to maximize that number when the time comes for selling the business.”
Even if you don’t end up immediately selling, having conversations with an experienced broker can at least give you an idea of what your future options are. It’s a good idea to have a business broker in your professional network.
4. Measure Your Mental Preparedness
It’s easy to assume that selling a business is a simple game of math, money, and numbers. But it’s far more emotional than this.
“Selling your business isn’t a split-second process. The entire process can sometimes take a year or more,” entrepreneur John Turner says. “Being emotionally ready is key to making sure the process goes smoothly, instead of it being emotionally draining.”
Take some time to consider whether you’re actually mentally prepared for the sale of your business. Not only do you need to be prepared for the actual sales process, but you also have to look into the future and consider life after selling. Will you be happy and fulfilled?
Putting it All Together
It’s impossible to know what will happen in the process of selling a business. However, the more you prepare on the front end, the more likely it is that things will go smoothly on the back end. Approach this process like you would any other aspect of your business – strategically and diplomatically – and you’ll put yourself in a position to be successful.