Selling your business can be a stressful time. You have poured your blood, sweat, and tears into this company. You have worked long hours and missed family functions. It has been lonely at times and rewarding at others. When faced with tough decisions you understand all too well the old saying “heavy is the head that wears the crown.”
Now it is time to move on. You are going to sell the business and transition to the next stage of your life. You want to sell it for the most profit, but you know the business must be priced fairly to find motivated buyers. How do you keep your sanity? I have prepared a list of 7 points to remember and use to make the selling process easier and help you get top dollar for your enterprise.
Point 1: Start Early.
If you are considering selling your business, the time to begin preparing is yesterday. According to the experts, you should allow yourself at least 24 months of pre-planning before putting up the “for sale” sign.
Point 2: Prepare, prepare, prepare.
Just like the homeowner who puts a fresh coat of paint on their house in preparation for marketing the property, a business owner needs to “freshen up” his business. Financial documentation is a must. Ideally you should have 5 years of tax returns and financial statements illustrating sustainable profitability. Do your homework, research trade magazines in your industry that have businesses listed for sale. Use the internet and Google “businesses for sale” to gauge prices of similar companies.
Point 3: Get an objective third-party valuation.
While you may be an expert managing your business and believe you can value your company. Resist the urge. Many owners will overvalue their company just like the homeowner who thinks his house is worth more than it is because of all the improvements and money he has invested in it. The question I always ask a business owner is, “what financial formula did you use to value the company? Objective valuations can be done by CPA’s, valuation specialists, or financial consultants. Your budget will determine how detailed a valuation is conducted. You can spend $10,000 or more to count every paper clip or less than a $1,000 to have a valuation done based on financial statements.
Point 4: Sell your business with a professional this is not a do-it-yourself project.
Do not resist hiring a business broker to sell your company. Selling your business is a full-time job, and includes tasks such as:
- Preparing marketing material
- Marketing the business
- Pre-qualifying prospective buyers
- Showing prospective buyers around
- Negotiating the sale
- Preparing documents
- Closing the sale
Focus on running your company it’s what you know best. The added value a broker brings can be well worth their typical 10% fee considering the increased price they should be able to negotiate, and the time and effort they save you. Use other professionals as needed.
Point 5: Maintain strict confidentiality.
Letting everyone know your business is for sale can open up a “Pandora’s Box” of problems. It could adversely affect sales, employee morale and vendor relationships. Key management could begin a mass exodus due to perceived employment uncertainty. A skilled business broker knows how to “get the word out” with minimal business disruptions.
Point 6: Stay informed, keep involved, but don’t meddle.
Resist the urge to micromanage the sales process and relationships with your broker and other professionals. It is extremely important to set the rules of engagement at the beginning. What will be your role, before, during, and after the sale? How frequently will you be updated? What amount of notice do you require before a prospective buyer is shown around? Make a list of your questions and get them clarified at the beginning to foster a good working relationship with your professionals and ease your stress.
Point 7: Maintain a positive attitude.
When selling your business you may experience a whole range of emotions from terror to elation and everything in between. There may be times when you are second guessing your decision to sell. Maintain balance. Get excited about your next great adventure in life, whatever that may be. Be positive, soon you will be starting that new company, sipping drinks under the shade of a palm tree, taking that long trip you always wanted to, but never could get away from the office, or doing just about anything you can think of. Best wishes on your successful sale.
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