July 25, 2014  
 
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Selling Your Business

 

How to Sell a Business

Wondering how to sell your business? This article explains how to sell a business. It introduces you to the basic processes involved in selling a business and introduces you to key players (e.g. business brokers) that you may want to get involved.

For many small business owners, selling a business represents the culmination of their entrepreneurial career. You've worked very hard to build your business and make it what it is today. Now it's time to slow down and enjoy the fruits of your labor.
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Ironically, your final task selling the business can also be the most stressful. One way to minimize that stress is to take a deep breath and begin to deliberately work through a step by step process.

Step #1: Self-assessment

The first thing you need to do is to assess your reasons for wanting to sell the business. You have to be 100% sure about your decision because once it's done there is no turning back. This is also the time to ask yourself what you hope to achieve in the selling process, i.e. what is the minimum amount you can afford to receive for your company.

Step #2: Valuation

Business valuation can be tricky. Discerning a fair and objective price for your company will require you to calculate its worth based on one or more generally accepted methods of business valuation. Do your best to set aside your emotional connection to your company. Otherwise you are likely to end up an inflated value for your company that is out of line with the market.

Step #3: Get your business ready for sale

When you sell a house, there are usually things that need to be done to prepare it for sale and make it presentable to potential buyers. The same is true when you sell your business. Potential buyers will want to examine assets such as buildings and equipment firsthand. But they'll be even more interested in your business' financial statements.

With the help of your accountant, prepare a packet of financial information that accurately reflects the financial condition of your business. Make copies of it to be used later when you begin to meet with potential buyers.

Step #4: Consult with a team of professionals

Once you have done what you can to prepare your business for sale, it's time to bring in the pros an accountant and lawyer for sure, and possibly even an appraiser and business broker. The pros may suggest may make additional suggestions regarding valuation and preparation. However, don't feel the work you have done beforehand is wasted. By doing some of the work in advance, you gain perspective about the selling process. You might also save a little money.

Step #5: Screen potential buyers

Not everyone who expresses interest in your business will be a serious buyer. Some people shop for businesses like other people window shop for shoes. The problem is that showing your business to potential buyers takes time. Rather than waste your time with insincere customers, it is much better to screen buyers in advance and only meet with those who are truly serious.

Note: Do not give out any information about your business until you have pre-qualified potential buyers! It is not unheard of for competitors to disguise themselves as buyers in order to gain information about the competition.

Step #6: Finalize the sale

Once a deal has been negotiated it is up to the attorneys and lenders to finalize the sale. All you have left to do is sign a few papers and ride off into the sunset.

Related Articles

Want to learn more about this topic? If so, you will enjoy these articles:

Choosing an Investment Banker
Five Tips for Maximizing Your Business Sale Price
Decline in U.S. Business-for-Sale Transactions
Confidentiality Breach Can Ruin A Business Sale
Ten Reasons Why Business Owners Sell Their Companies


Conversation Board

We greatly appreciate any advice you can provide on this topic. Please contribute your insights on this topic so others can benefit.

Jim Caudle Sr. 12/31/2008

I'm really going to read any & all info about selling my small business. I'll be 65, Feb. 2009, & want to enjoy a few years of relatives & travel some. I made it thru 2 bouts of cancer, & my wife has too, so it's time to do what we enjoy, nothing but kids, grandkids, & great grandkids. My tool is patented, & sold in every state & some offshore countries. I spend all our profits on advertising, so I'm wanting to sell it to a tool supply company, or anyone that wants to move forward with it. Thank you, Jim Caudle Sr

Lake Falconer 2/21/2010

This is a good description of a broker approach to selling - if you have a larger/better quality business it would be worth engaging corporate finance advisers to help you maximise value on exit - if you are in the Cambridge or elsewhere in East Anglia and the East of England have a look at www.pemcf.com We might be able to help.

Bobby Pettit 9/30/2010

Is my customer base worth anything? I closed an automotive repair shop four years ago. Is it worth anything? Thanks Bobby

Ken Gaebler 9/30/2010

Bobbby, if you had tried to sell your customer base four years ago, it might have been worth something. At this point, the customer list and information is pretty old. To find out if it's worth something, write a letter and send it out to companies you think might be interested in buying an auto repair business customer list and see what happens. Good luck!

Tina Nail 3/27/2011

I am attempting to sell my campground without a broker. What steps can I take to pre-qualify potential buyers so as to reduce the time I spend with tire kickers? Thank you.


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