Selling my Business – How do I start?
You’ve decided that you want to sell your business. You may not know when you want to sell it or how you’re going to sell it but you want to begin the process of understanding how do I sell my business. Below are six items to think about as you consider selling your business.
1. How would a Potential Buyer Look at You.
How would your business look like to a buyer if you were to go and try and sell it today? Are all of your financial statements up-to-date? Do you have the necessary resources and individuals in place to help the buyer take over your business? If you go away from the business how does it run. Are you assuming the buyer will take sole responsibility for running the business or do you have an individual or individuals in place who could help the potential buyer continue the business move forward?
It is critical to think about what the buyer will care about if they were to look at your business today and how they would perceive it in terms of moving into your role.It is valuable to put together a transition plan thinking about a buyer and what they will care about if they consider running your organization. Think of all the key aspects that make your business a success today and how are all those aspects of your business going to run with someone else in control.
2. Do you understand the process of selling a business?
Do you understand the value of business brokers and other advisers who can help with a successful conclusion? Do you have the time currently to dedicate selling your business? What needs to be in place in order to allow you to focus on continuing to operate your business while you are selling your business.
Additional Information: Go to the following link that provides ten questions to consider in selling a business yourself versus getting professional assistance.
3. Valuing your business.
When you think of selling your business one of the natural things that comes to mind is what is it worth and what are expectations on a monetary basis. One way to think about value is to look at what you’re asking from a buyer and ask yourself the following;
- How many years would it take a buyer to get their money back based on your current operations if they change nothing today
- Given your thoughts on the value of a business would a potential buyer see better value in starting a similar business themselves versus purchasing yours
- What tangible, secure and repeatable revenue can a buyer get from your business
- Would you buy your business at the asking price you are asking for? Put it another way- would you risk your savings buying your business
The questions above are a simple way of looking at valuing a business but provide a framework of thoughts that can curb unrealistic expectations. Look at and understand valuation methods used within the industry you participate; asking a business broker or business valuator is a way to allow a third party to provide a perspective beyond yours.
How confidential do you want the process of selling your business. Most entrepreneurs don’t want employees, clients, or competitors to know that they’re selling. The dilemma is this- if your employees, clients, or competitors were to find out how do you manage message? Always be prepared to be able to answer or communicate to your clients and employees why you’re selling so that you manage the message. A key reason why sellers engage business brokers or advisers is to provide confidentially as they can be the front of the sales process on your behalf.
Getting appropriate confidentiality agreements in place is a key tool to maintaining confidentiality. Take time to understand those individuals or Company’s who want to enter into a confidentiality agreement with you; how comfortable are you that they are looking at your sensitive business information. Would you really want someone to look at your business if they were not a serious buyer? Potential buyers can be qualified to ensure they are credible from an expertise, financial, and other basis.
5. Make the Time
Selling a business can take considerable time not only in the efforts you need to put in but also the time it can take to complete a transaction. Be prepared that it could take up to a year or more to sell your business, which is not an abnormal timeline. You’re not looking to find 3 to 5 purchasers of your business your looking to find the right one. Think through who are the most logical buyers at the start of selling your business and lay out the game plan to get their attention.
6. Identify Logical Potential Buyers
If you had to jot down who would be the top five logical buyers of your business who would they be and what do they care about. How do you go about attracting them and tailoring a message that fits their needs versus a one size fits all approach? Here are a could ways to identify logical buyers;
- Is there someone or multiple individuals in your organization that would have interest taking over your business
- Is there a company who currently does not compete against you that would see a benefit to adding your business as a new business line
- Which competitor could you be complementary to? For example, are your clients completely different than theirs. Is there a potential competitor that does not currently serve the market you serve?
- Can you identify individuals who do own a business today but are a logical fit to your business? For example, if you ran a skin care practice would a doctor who is a general practitioner care to expand their operations into skin care.
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