There are many reasons to sell a business, from making a profit to moving on and starting another one. Perhaps you are ready to retire, or maybe you have a medical practice and want to transition to working for a medical group or hospital instead.
From HVAC businesses to franchises and medical practices, we at Rogerson Business Services have helped numerous individuals transition from their current situation 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.
When you are ready to sell your business in California, here are some key steps we have found to ensure your sale proceeds as smoothly as possible.
If you are considering valuing and selling your company within six to twelve months, give Andrew Rogerson, a Lifetime Certified Business Broker based in Sacramento, California, a Call Toll-Free at (844) 414-9700 or email me at support@rogersonbusinessservices.com, who services the whole state of California.
Take Stock of Where You Are
The first key is to understand your current situation. 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 assess your business to determine if they want to pursue a purchase option further, this will impact 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 selling a home, you need to consider 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, is it located in a busy area that receives a lot of foot traffic? If you are selling a medical practice, is your office conveniently located near a hospital or other medical facilities that serve your patients? The business adage ‘ location, location, location’ is as key in selling your business as it is in gaining customers.
Type of Business:
Just like homes, businesses undergo cycles, and some are worth more than others. For instance, selling a medical practice can be relatively easy in some cases, but in others, it is much more challenging, depending on the market. Selling a coffee shop franchise is often a straightforward proposition, but selling a seasonal landscaping business can be more difficult, especially during the offseason.
The Economy:
Factors such as interest rates impact a Buyer’s ability to secure a reasonable loan, if needed. Still, a down economy can also result in 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 numerous businesses of your type for sale, it may be more challenging to obtain a favorable price for yours. You will be competing for buyers, which means you must stand out from the competition to secure the price you want and the right Buyer.
The market outlook for your business is a crucial factor in determining 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 will need a team of professionals to sell your business. There are several steps you will need to take to prepare it for sale, but if you attempt to do them all yourself, you will not be able to do what you do best: run your business.
You don’t want your customers or sales to suffer because you’re focused on selling your business. There is another factor, though. Unless you have an accounting business, you are not the best person 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, well-priced businesses sell quickly, and the right professionals can ensure 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 grow your business while it is 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, such as an HVAC business. This also helps your potential Buyer understand your method of doing things, which is often valuable for continuity of service.
Additionally, you should determine what you will do next. The exit strategy you have may influence the type of offer you are willing to accept. For instance, if you plan to reinvest in another business, the best cash offer may be the best option for you. 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 prepare it for final sale, considering any potential overlap between you and the next owner, and understanding what that will entail, as well as your exit strategy, will help you move forward in the process.
Understand Your Buyer
There are several types of buyers for your business, and therefore, different types of sales for each. It is essential to understand who will be buying your business and why. This will help you market it properly and understand the type of offers you might receive. One of the biggest mistakes sellers often make is expecting cash at closing. Here are some types of deals you can expect.
- Cash Buyers: Although rare, an individual may occasionally come along with cash and purchase a business outright.
- Seller financing: More often, the Seller will finance a portion of the deal, allowing payment to be made over time.
- Earn-outs: This refers to the 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 acquisitions often involve stock options and other non-cash payments.
Understanding who your Buyer is and the type of deal they might offer you is an essential part of being ready to sell your business.
Market Your Business
You already market your goods and services, and you’re probably quite skilled at it. However, marketing your business for sale is an entirely different matter. You will need to do some research to understand the differences. To prepare your business for sale, you will need a comprehensive promotional package that contains all the necessary information a potential Buyer may require.
Again, this is where a professional comes in. Business brokers create these packages all the time and can ensure yours has everything it needs to stand out from other businesses currently for sale in your industry. This packet will include items such as your sales and marketing plan, your business plan, and specific financial information.
Still, you are the one who knows your business best, and your business broker and the professional team you assemble to help you will rely on you for the answers 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 numerous steps involved, and for optimal results, it is recommended to hire a business broker for assistance.
Do you have any further questions, or are you ready to start the process of selling your business?
Contact us at Rogerson Business Services to learn how we can best assist you.
If you are considering valuing and selling your company within six to twelve months, give Andrew Rogerson, a certified business broker based in Sacramento, California, a Call Toll-Free at (844) 414-9700 or email me at support@rogersonbusinessservices.com, who services the whole state of California.
