Selling a California business is rarely a straightforward process. Understanding the steps involved in selling a company can help make the process smoother and more efficient.
Perhaps one of the biggest mistakes is that the Seller does not put themselves in the shoes of the many other parties. These parties include not only the Buyer but also a lender, a landlord, employees, an attorney, a CPA or accountant, and perhaps a franchisor or others.
This article outlines five steps to take when selling a business.
1. Get a professional third-party valuation
Naturally, the Seller wants as much money for the business as possible, and the Buyer wants to pay as little as possible. The place to meet is probably the “Warren Buffett place,” with apologies to Warren Buffett. He is on record for saying something close to this: I would sooner pay too much for a good company than get a great deal on a company that won’t be around much longer. Ensure your valuation accurately reflects the critical steps you’ll take when selling a business.
2. Hire a qualified professional whom you trust
Selling a business is not a quick or straightforward process. Each business has its unique characteristics and is part of the dynamic global, regional, and local economy, as well as the specific industry in which it operates. Because of the complexities, ensure you have a qualified professional on your team whom you trust and have complete confidence in. Apart from trust, other essential components to look for include professional qualifications from the International Business Brokers Association (IBBA), such as the CBI (Certified Business Intermediary) or the State Business Brokers Association (if one exists). Some states require a real estate license – ensure your professional has any necessary permits and understands the required vital steps when selling your business.
3. Make sure the business is saleable
Many owners plan to sell their businesses. As soon as it is on the market, they stop doing the hard work that got the business to where it is now. Some even go on vacation. It typically takes around 8 months to sell a business, if it is sold at all. Ensure you continue to advertise to your customer base, motivate your employees, check that your customers are happy, pay your bills on time, and, most importantly, keep your landlord happy. The number one reason a business won’t transfer from the Seller to the Buyer is a dispute between the landlord and the Seller and/or Buyer. When taking steps to sell, remember, if you need a vacation, take it before putting the business on the market. Once it’s sold and you have trained the Buyer, it’s time for that trip of a lifetime.
4. List the business for sale at or near the business valuation
Suppose you’ve owned the business for many years or recently invested a significant amount in resolving an issue. In that case, it’s not uncommon for sellers to seek a high price so they can recoup some of their expenses.
Buyers have a large number of businesses to choose from. Because most companies look similar or are not emotionally attached to the business, they have little problem walking away.
A good business for sale is reasonably priced and has good potential. A Buyer is looking for potential. Too many sellers want to be paid for potential, but that’s the reason why the Buyer is buying the business and is only willing to pay a fair price.
The Buyer is the one who takes advantage of the potential; they do not have to pay the Seller for it when they buy it. One of the key steps when selling a business is being realistic with pricing.
5. Don’t forget the Golden Rule
The Golden Rule is to put yourself in the other party’s shoes.
When speaking with your Buyer, try to understand what is most important to them. If you discuss your lease with your landlord, determine what’s important to them. And so it goes on. Lenders, business brokers, franchisors (if applicable), attorneys, accountants, and other professionals, as well as family members, all play a role. Selling a business is not easy, even at the best of times, and there are specific steps you must take.
It’s even more challenging in a tough economy, especially when finances are tight, key players have health issues, and numerous other variables are at play. Hence, the value in hiring a professional you trust is that they help guide you and keep all the moving parts lined up and managed, with clear steps in mind for a successful sale.
Are you thinking about selling your business?
Would you like to know the value of your business?
If you would like more information, please visit my website and this page on Business valuation.
For more immediate assistance, you can email Andrew Rogerson or call me Toll-Free (844) 414-9700 or email me at support@rogersonbusinessservices.com.