Selling Your Business: Showing and Growing
When you are selling your business, we always stress how important it is to be organized and to have certain documentation at your fingertips. This includes your taxes from the last three years, profit and loss statements, cash flow statements, payroll, bank statements, and more. Why?
First, these documents show the current health of your business. Are you making money? Are you growing? Secondly, it shows the past performance of your business, and where you have come from before. Did you start out profitable? Have you grown year over year? Have there been setbacks?
The other thing these statements do is allow you and your buyer to make projections. With good management and a continuing plan, will your business continue to grow? What’s going on in your industry, and what does that mean for the future?
This means that you must not just be a shower who discloses what your business has done and is doing, but you must be a grower as well. What does that mean?
Showing Involves the Past
One of the big mottos we emphasize when selling your business is disclose, disclose, disclose. The reason is that if a buyer sees any kind of red flag you have not revealed, it can quickly torpedo a deal. That means that even if you have had setbacks you’ve had to overcome, now is the time to reveal them. They can include:
- A poor sales period, be it a month, year, or quarter.
- The loss of a key employee.
- A partner leaving the company.
- Litigation or legal issues.
- Regulatory issues.
The key to this is that you need to have overcome these obstacles. If you are selling when you are still struggling with them, it might be time to reconsider the timing of selling your business. You may need to correct course and be more profitable before you put your business on the market.
Showing also shows where you have come from and can be a very positive thing. If you are growing at a healthy pace for your industry year over year your buyer will see the potential of what you are selling and will be more likely to pay your asking price.
Showing Involves the Present
Showing also means sharing what is going on right now with your business. This is not only critical for the buyer to make a well-informed decision, but it is also vital for them to see that you are organized and running your business well.
There are several reasons this is important, but one of the most common is simple. It’s easier to take over something that is running well than something that is running poorly. Stepping into an organized business is much easier than stepping into one where paperwork is incomplete, inaccurate, or worse lost in a pile somewhere on the owner or manager’s desk.
This applies not only when you are selling your business, but all the time. Showing yourself that your business is profitable and running well lowers your stress levels, and helps you make better business decisions.
Growing Involves the Present and Past Too
Growth is something that has happened and is happening too. Even if you’ve had a bad quarter before, as long as your growth year over year is steady, that doesn’t matter as much. It’s easier to ride out a business storm when you know relief is coming.
This is why we talk about three years of business records and tax returns. These show historic and current growth, and those are things that you as the business owner can use to help sell your business to the right buyer at the right time for the right price.
Growing is Key to Selling Your Business
There are things that set one business that is for sale apart from another in the same industry. Growth is one of those key factors. If your business is growing and another similar one for sale is not, your business will be easier to sell.
The truth is, many businesses are growing, but business owners don’t have what they need to prove it. Their financial reports are often not right at hand, and they may only look at them from time to time. As long as they are still making money, it doesn’t matter to them.
But those records are vital to selling your business and to running your business deliberately working for growth.
Documents You Need to Sell Your Business
While we talk about this in more detail in other posts, you need some basic documents at hand in order to sell your business:
- Taxes from the last three years, your personal and business returns.
- Profit and loss statements.
- Cash Flow Statements.
- Bank statements.
- List of Assets and Debts.
Before you even think about selling your business, gather these documents and have them handy.
Are you ready to sell your California business? Do you want to get an idea of what it is worth before you decide? We offer a FREE business valuation tool, and you can start the process here.
When you’re ready to sell or if you have questions about your business valuation, contact us here at Rogerson Business Services. We have the experience to help you sell your business located in California and find a qualified buyer. We look forward to hearing from you.