How To Sell Your Business

Learn how to sell your business correctly with these tips. Check out our Exit Your Way for business planning and businesses to buy!

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If you’re ready to initiate the sale of your business, follow these steps to help you secure the desired deal and ensure a smooth transfer of ownership:

1. Maintain Pristine Financial Records:
   • Ensure your financials are well-organized and accurately documented.
   • Pay your taxes and demonstrate profitability on your tax returns.
   • Collaborate with your accountant and tax professional to establish the foundation for your business valuation and negotiation.
   As potential buyers will scrutinize your financials, gather as much financial information and documentation as possible.While organizing your finances, ponder these questions:
   • Do you possess intellectual property that enhances your business’s value?
   • What unique features distinguish your business and make it more valuable?
   • Can you provide documented standard operating procedures to the acquirer?
   • What are the strengths and weaknesses of your business?
2. Determine Your Business’s Value:
   • Seek a professional to assess your business’s true fair market value.
   • This expert will analyze your financial stability, historical sales, expenses, and anticipated future performance to optimize your valuation without overpricing your business.
   The valuation process involves evaluating various factors, including financials, products, services, business model, marketing strategies, and management team. The valuation estimate relies on comparable businesses that have recently sold.Unique aspects that may enhance your business’s worth include:
   • High growth rate
   • Competitive advantages
   • Competent management
   • Market share
   • Company size
   • Industry and business model
   • Capital requirements
   • Sales and distribution processes
   Every business is distinct, so consulting a reliable third-party for a professional valuation is essential.
3. Hire a Trustworthy Broker:
   • Employ a broker to navigate the intricate selling process and alleviate your workload.
   • A competent broker adds value beyond their fee.
   Effective brokers perform tasks like:
   • Conducting a business valuation and advising on a valuation range.
   • Maintaining confidentiality.
   • Orchestrating a competitive bidding process.
   • Organizing due diligence efforts.
   • Connecting you with qualified buyers and promoting your business.
   • Facilitating buyer interactions.
   • Assisting with negotiations.
   • Introducing funding and financing resources.
   • Coordinating legal, accounting, and advisory professionals.
   • Ensuring a mutually beneficial deal.
   Broker commissions vary based on factors like revenue, location, business type, size, and deal complexity.
4. Identify Pre-Qualified Buyers:
   • Engage only with serious buyers who can follow through with a deal.
   • Ask crucial questions upfront to gauge their commitment.
   Essential questions to ask potential buyers include:
   • Do they have the necessary funding or pre-approval?
   • Do they possess industry experience?
   • What are their intentions for the business post-sale?
   • What is their proposed timeline?
5. Finalize Contracts and Complete the Sale:
   • Finalizing legal contracts, handling negotiations, and ensuring the deal’s success is a complex phase.
   • Consider hiring a business sales lawyer to oversee this stage.
   • Ensure all documents, including purchase agreements, bills of sale, warranties, indemnifications, asset transfers, non-compete agreements, intellectual property transfers, and employment agreements, are meticulously reviewed.
   Seek professional guidance to avoid pitfalls during this process, which may involve a considerable amount of paperwork.

FAQs about selling a business:

• Average Sales Timeframe: Typically, the sale process takes four to ten months, depending on deal size.
• Non-Compete Agreements: These generally last three to five years, tailored to industry and region.
• Employee Fate: Post-sale employment decisions are at the buyer’s discretion, but you can stipulate employment requirements in the contract.
• Audited Financials: Buyers usually conduct quality of earnings analyses rather than full audits.
• Liabilities: Clear outstanding liabilities before the sale; unresolved debts can become the buyer’s responsibility, subject to negotiation.

Selling a business is a multifaceted endeavor, demanding meticulous preparation, documentation, and collaborative efforts between both parties. Adhering to these steps will position your business for a successful sale that benefits both you and the buyer.

Connect with me on LinkedIn or SPN, if you want help selling your business!