5 Tips to Master the Art of Selling your Business
5 Essential Tips to Master the Art of Selling your Business
Have you started to contemplate the eventual sale of your business? Never sold a business before? Here are five essential tips to help you prepare the business for sale, find a buyer and achieve a deal on price and terms that you’re happy with.
1. Value the business
Get an accurate valuation of your business from a trusted source. Valuing a small business is much more complex than valuing a house as there are so many variables – encompassing not just the value of your premises but also that of your revenues, stock, brand, employees and more besides.
The best thing to do is to use a business broker with experience in valuing businesses – ideally in your sector – or one who can refer you to a valuation expert who can. This is by far the best way of adding credibility to your eventual asking price. You will almost certainly lack the objectivity and knowledge to value the business yourself.
2. Create a high-impact advert
Making your business sound as appealing as possible to prospective buyers while maintaining the confidentiality of sensitive information can be tricky. It’s not advisable to hand over every piece of information in the initial advertisement that you post online – although your competitors would love it! Rather than publishing your profit-and-loss accounts straight off, burnish your business’s appeal by including in your advert professional photographs of the premises and/or products (it’s not worth skimping on this) and unique selling points – for instance “lots of repeat business”, “great lifestyle business”, or “scope for growing revenues by extending opening hours”.
The name of the game is to attract buyers quickly and discreetly. Prepare a selling memo: a guide to your business that details its current status and offers a tantalizing glimpse into its future prospects. It is quite reasonable to ask buyers – once you are satisfied they have the finance and motivation to close the deal – to sign a confidentiality agreement before releasing your selling memo.
Ask your business broker to put together a document. Use the services of a reputable firm of business brokers, such as VR Business Brokers, who will give you invaluable guidance on showcasing your company to give yourself the best chance of a quick sale at the highest price possible.
3. Respond to inquiries promptly
Every small delay to the sales process can dampen the buyer’s enthusiasm and stall momentum. Unreasonable days can even prompt the buyer to walk away. Responding to inquiries promptly is the best way to prevent ‘deal fatigue’ from setting in.
Reduce the risk of deal fatigue by having all relevant documentation – legal, financial and otherwise – in order and readily available before you put the business on the market. Also, reply to any inquiries in a timely manner. Of course, some inquiries may take some time to address – for instance, if submitted on a Friday evening and the information requested can only be obtained from the IRS between Monday and Friday. No matter. An answer like this will at least give the buyer an idea of the time frame: “Thank you for your inquiry. Unfortunately, I can only obtain that information during weekday hours so I will respond early on Monday. Thank you for your patience.”
Again, an experienced business broker can help you keep delays to a minimum, by advising on how to respond to inquiries, and manage the buyer’s expectations.
4. Think about the timing of the sale
Ideally, you will begin to prepare for the sale of your business at least six months in advance. The more time you have to prepare your premises, processes, and paperwork to effect a smooth transition to a new owner, the better.
This means getting your books and records tidied up and up to date. It means enhancing first impressions – so cleaning your premises and maybe giving them a lick of paint. It means renewing customer contracts that are set to expire soon. It means seizing any ‘low-hanging fruit’ in terms of growing revenues or cutting overheads. The better your financials look, the higher the price you can get.
Finally, how dependent on you is your business? If much of your custom is dependent on your skills or personal relationships with customers, then you need to disentangle yourself gradually from the business in advance and put measures in place to minimize disruption.
A business broker can help you with all of these tasks. Once you have a picture of how long the above steps might take, then you can decide on a reasonable time frame for getting the business in a saleable condition.
5. A business broker
We’ve already touched on the benefits of a business broker in the first four tips. And that is precisely the point: they really can help you with every part of the selling process. A competent, experienced broker will help you sell the business with confidentiality and reach a larger pool of potential buyers.
They can negotiate skillfully and objectively with the buyer on your behalf, thus taking any emotion and inexperience out of the equation. They can also help you value your business, get your paperwork in order, screen buyers and more. It will cost you money of course – in fees and commission – but will save you time, freeing you up to concentrate on keeping the business in good enough shape to sell.
And if you choose your broker wisely and heed their advice, then it may well save you money overall anyway – because you’ll have a greater chance of maximizing your sale price.