So, You Are Ready to Sell Your Business
There are many reasons to sell a business, from making a profit to moving on and starting another one. Maybe you are ready to retire, or maybe you have a medical practice and want to work for a medical group or hospital instead.
From HVAC businesses to franchises and medical practices, we at Rogerson business services have helped a number of people go from where you are now to a successful sale. A big part of that is our expertise at preparing you for the sale and matching you with the right buyer at the right time.
So when you are ready to sell your business, here are some simple steps we have found are key to making sure your sale goes as smoothly as possible.
Take Stock of Where You Are
The first key is to understand where you are now. Is your business profitable? Are you experiencing the kind of growth that will interest investors? Do you have the tools to demonstrate that growth? What kind of shape are your business equipment and other assets in?
These are all questions buyers will have. When they initially look at your business to see if they want to further pursue a purchase option, this will determine the curb appeal of your business. It is your first impression, something you never get a second chance at.
If your business is in good financial and physical shape, you are one step closer to being ready to sell.
Look at the Market for Your Business
Of course, much like when you are selling a home, you need to look at how the market looks for your business. Much like home values are dependent on the neighborhood they are in, the value of your business partly depends on several factors that determine what it can realistically sell for. Here are a few of them:
Location: Where is your business located? Is this a good place for your type of business? For instance, if you are selling a restaurant, are you in a busy area that gets a lot of foot traffic? If you are selling a medical practice, are you near a hospital or other medical facilities that make your office convenient for patients? The business adage of location, location, location is as key in selling your business as it is in gaining customers.
Type of Business: Just like homes, businesses go through cycles, and sometimes businesses are worth more than others. For instance, sometimes selling a medical practice is easy, and others it is much harder depending on the market. Selling a coffee shop franchise is often a simple proposition but selling a seasonal landscaping business may be more difficult especially during the offseason.
The Economy: Things like interest rates affect a buyer’s ability to get a reasonable loan if they need one, but a down economy can also mean reduced profits and lower sales for some businesses. The best time to sell any business will depend on the current economic climate for that type of business.
Other Businesses for Sale: Look around. If there are a lot of businesses of your type for sale, it may be tougher to get the price for yours. You will be competing for buyers, which will mean you have to stand out from the competition to get the price you want and the right buyer.
The market outlook for your business is an important factor in the timing of your sale. If you need help assessing the market, a business broker can often be a great help.
Find the Professionals You’ll Need
This brings us to the fact that you are going to need a team of professionals to sell your business. There are a number of steps you will need to take to get it ready for sale, but if you try to do them all yourself, you will not be able to do what you do best, and that is run your business.
You don’t want your customers or sales to suffer because you are concentrated on selling your business. There is another factor though. Unless you have an accounting business, you are not the best to do the accounting tasks that will be necessary.
The truth is, just as you are a professional in your field, so are others you will need. A business broker will often coordinate your team for you, but you need a marketing plan, recasting of your cash flow sheets and other financials, and someone who knows how to find the right buyer for your type of business.
Remember, good businesses that are priced well sell quickly, and the right professionals can make sure your business is one of those.
Determine What’s Next
What happens if your business is not quite ready to sell, or the professionals you hire tell you that you may not get the price you want at this time? All is not lost. Sometimes there are just steps you need to take to make your business more attractive. It is often desirable to grown your business while you have it on the market.
In some cases, you may want your potential buyer to work with you for a while to make the transition easier for your customers or patients. This is often true of medical practices or service industries like an HVAC business. This also helps your potential buyer understand your method of doing things, often valuable for continuity of service.
Also, you should determine what you are going to do next. The exit strategy you have may influence the type of offer you are willing to accept. For instance, if you are going to reinvest in another business, the best cash offer may be the best for you to take. If you are retiring, a stock purchase or future revenue share may be more lucrative in the long run.
Determining what you need to do with your business to get it ready for final share, if there will be some overlap between you and the next owner and what that will look like, and what your exit strategy is will help you move on in the process.
Understand Your Buyer
There are a few different types of buyers when it comes to your business, and therefore a different type of sale for each. It is important to understand who is going to buy your businessand why. This will help you market it properly and understand the type of offers you might receive. One of the biggest mistakes sellers often makeis expecting cash at closing. Here are some types of deals you can expect.
- Cash Buyers: It is rare, but sometimes an individual will come along with cash and simply purchase a business outright.
- Seller-financing: More often, the seller will finance a part of the deal, so payment will come over time.
- Earn-outs: This is money received later based on the future performance of the business.
- Escrow/Holdback Agreements: These stipulate that you will finish future work before receiving final payment for your business.
- Merger and Acquisition Deals: These are a topic entirely their own, but mergers and acquisitionsoften involve stock options and other non-cash payments.
Understanding who your buyer is and the type of deal they might offer you is an important part of being ready to sell your business.
Market Your Business
You already market your goods and services, and you are probably pretty good at it. However, marketing your business for sale is an entirely different thing. You will need to do some research to understand the differences. To get your business ready to sell, you will need a promotional package that contains all the information a potential buyer might need to have.
Again, this is where a professional comes in. Business brokers literally create these packages all the time and can ensure yours has everything it needs and stands out from other businesses currently for sale in your industry. This packet will include things like your sales and marketing plan, your business plan, and certain financial information.
Still, you are the one who knows your business best, and your business broker and the professional team you put together to help you will call on you for the answer to specific questions a buyer may have.
Getting ready to sell your business is about more than just putting out a sign and taking out some ads. There are a lot of steps, and for the best results, you should hire a business broker to help you. Have more questions or ready to get started on the path to sell your business? Contact us here at Rogerson Business Services to see how we can best help you.