5 common Ways to Sell a Business
The process of selling a business is quite overwhelming especially if you have never done it before. There are many factors to be considered before you proceed further between the timing of sale. Firstly, you should be quite sure that it is all OK to sell your business as there are many business owners who are struggling with this concept, especially if they have built the company from scratch.
Selling your business can be extremely rewarding if you are seeking for retirement or feeling overworked or you just want to do something new in your life. If you take the right path, then you can make profits through it.
In this blog, we shall discuss about 5 steps to sell your business. Here’re presenting the 5 ways to sell a business:-
Know your brand valuation
Firstly, you should have an idea about your business valuation. There are many entrepreneurs who thinks that they have the complete idea about their business worth. But when it comes to reality, the number they predict is quite away from the real value. That’s why it is advised to consult evaluation expert who will tell you the sell price.
Do not try to determine your business valuation otherwise the sale price may vary. If you will consider an expert then you will get the real idea about your company’s worth. The true value of your business can be determined through a detailed documentation and report. Hence, you can get a rough estimate off what you can expect.
But if you don’t want to hire a valuation expert and you want to figure out your business valuation by your own then there are 3 basic steps namely cost approach, market approach and the intrinsic value approach. Among the three, the last one that is the intrinsic value approach or discounted cash flow approach is the easiest one.
There are plenty of other factors that you should consider like business debts, assets, industry trends and companies for sale. it should be also be noted that whether you are trying to evaluate your business by your own or through an expert it is not important that the final price will be the same.
Organise all your finances
Once you have decided the valuation of company then it is the time for you to organise the finances. Your financial records will be seen by lawyers, accountants, prospective buyers, brokers specialists, third party valuation firms and other people as well.
If you want everything to go smoothly then you should keep a record of all your finances. Generally, people ask to provide at least 3 years of tax returns and the financial statements which includes balance sheet, cash flow statement and income statement. If any mistake or disorganisation is found in these records then it could turn into a red flag for buyers.
The inconsistency in your financial records may give loop to another questions. Most of the people who are having a small business do not have a bookkeeper or an accountant. If your documents gets disorganise then you can hire an accounting expert who will help you in arranging all your financial records before you go for selling your business.
Hiring a broker
When it comes to selling a business there are basically two options available. First, you can sell it on your own and secondly, you may consult a broker. If it is your company or the company of any family member or some trustworthy people then you should handle selling the business by your own as it will save some money.
For a majority of circumstances, using a broker would be best choice. Of course, the broker will charge some additional fee but he or she will help you to get the best price to sell your business and it will be faster than you would be able to do by your own. Brokers charge their own commission so it will be beneficial for themselves that they will help you in selling your company at the best price possible.
You should compare the valuation of your company with that of broker add expert you have consulted so far or by your own. This valuation should be relatively close to each other. If there is a wide difference between the estimate of the broker and that of the export or your own then you should consult a 3rd party in order to know which one is more accurate.
Find the buyers who are prequalified
Once you have decided to sell your business then you will get multiple offers. Focus on the growth potential and strength of your business. You may also look for the competitors in the business industry who want to buy a business. Maybe your peer company is trying to diversify their business.
You may also use the networking or contact the people associated with your industry in order to make a good deal. Once you are done then both the side should make a decision such that transaction is fair and open.
It includes reviewing financial statements, customer contracts and operational processes. You can also discuss about the sale terms and close the deal once the transition is smooth for the employees as well as customers.
Finalise the deal by verifying the legal documents and contracts
Once you are done with a qualified buyer and accepted the offer then it is the time to finalise the deal. You should hire a lawyer so that this stage cannot get messy and confusing. Some of the legal documents and contracts which is associated with the business sale is required at the time of verification.
These documents include asset listings, purchase agreements, non-compete agreements, guidelines for the website use and domain name, bill of sale, and security agreements. You can drop a purchase agreement and contract by your own but you might miss an important information and maybe you can face some unforeseen circumstances therefore it is always advisable to hire a lawyer.
Conclusion
Selling a business take time. If your company is making profit and earning high revenues then you can get a good deal through a potential buyer.
