Building a business from the ground up has always been considered a grand accomplishment. However, many business owners may find themselves deeply involved in the business as they approach retirement or other life changes. Deciding to sell your business can be a harrying, and emotional, decision.
Once you have decided selling is the necessary next step there are many things to consider. Improper planning could result in selling your business for less than it is worth, or accidentally destroying the value of the company as it changes hands. Included here are a few things to consider before selling your business.
The first step in selling a business is equipping yourself with a talented team. You will likely need a transaction specialized accountant as well as experts knowledgeable in business sales and profit conservation. While you will find yourself with some fees for these advisors, they will likely be able to secure a much greater profit for your business and put you on even better financial footing.
Potential Doesn’t Profit
If you want to secure a high asking price for your business, you are going to have to demonstrate that your business is successful. Just because you believe in your idea, or have “perceived profit,” doesn’t mean buyers are going to believe in the company. Your asking price must reflect your current profit, not what you believe the company is capable of in the future.
Focus on Profit
Too often, business sellers will put the focus of their company sale on monthly revenue. Unfortunately, revenue does not speak well about how much your business is actually pulling in to keep. Your revenue could be $25,000 a month and your expenses could take up $24,000 of that. Pulling in $12,000 annually is not impressive to any buyer.
To really increase the asking price on your business put your focus on profit. Compile comprehensive financial breakdowns of your company’s revenue, expenses and annual profits. The more intensive look a buyer gets at your company, the more its true value will become apparent.
The worst thing you can do to the reputation of your business is make unbacked claims. Saying that you are receiving income from a property is one thing, but having documentation to back it up is another. Every expenditure and all incoming revenue must be documented and demonstrated for the buyer. Being able to verify all aspects of your business will make it more reputable and valuable to buyers.
A common problem with sellers is that they put their company out for sale after a recent downturn in profit. Attempting to convince buyers to bite based on previous profits is not an ideal model. Be realistic about the sustainability of your company’s profits, and ideas for future growth. Your most recent performance is the strongest talking point for your company, and without a good repute, could damage the value of your sale.