How to sell a small business
Thinking now is the time to sell or you're not sure when to sell your small business? Selling requires careful planning and making sure your business is at the most suitable for buyers. It can include everything from sloppy books to updating old systems to tiding up your business. You are probably asking yourself " Well what are the steps to get my business to sell?"
STEP 1: What is the value of your company?
You will need a valuation of your business. This will give you a good realistic estimate of what your business is actually worth. While financial firms do offer this for a fee of $3,000 to $5,000, Elite Commercial Brokerage Firm offers this for free. Small businesses are typically worth three to six times their annual cash flow. There are other factors like financial health, industry trends, market demand, location and other variables like COVID 19.
Step 2: Prepping your business for sale
Buyers typically want transparency. They are more thorough during due diligence period especially during this time. Buyers will ask for real estate, equipment, tax returns and other financials. We highly recommend working with an accountant to be able to provide clean financials once there is a potential buyer. You want to be sure to include all income at this point for the last three years. This will only increase the value of your business.
Step 3: Have an exit strategy planned in advance
Wether you are looking to retire or an unfortunate event occurred, you want to be prepared in advance to be able to sell your business at the highest value. One example would be to have a trusted loyal employee that would be willing to buy the business.
Step 4: Increase Sales
Buyers want to see a positive or upside numbers. If your sales are declining, it may not be the best opportunity for you to sell but if you find yourself with no option, Elite Commercial Brokerage Firm can help. We have sold businesses who had sales declining. To increase sales prior to selling, be sure to start marketing and advertising. Offer promotions or discounts to increase the number of sales. While you’re at it, push out bloated inventories and get operating systems up to date. Retail establishments might warrant a fresh coat of paint and some new fixtures.
Step 5: Hire a Business Broker
Business brokers help through the entire sale of your business. While you may think, it won't be so bad, selling a business takes a lot of time and a whole lot of paperwork. Business brokers help with all this stress and lift for an average of 10% commission of the sale. They perform the valuation, prospects with other brokers or lists of buyers, markets your business sales, and works to get the highest sale price for your business. They can also help find financial resources if needed. There are many ways to structure a deal and business brokers are experts in how to best structure.
Step 6: Strategic Planning
Your business broker conducts an assessment of the market response within the first 30 days of your listing going live. Feedback from qualified buyers is aggregated, and the listing strategy revised if needed. Don't get too excited about a buyer until they are vetted. They may not be able to get financing. The buyer should fit your company's culture as well.
Step 7: Maximize the Offer
Following an offer, your business broker contacts all interested parties, reviews offer terms, and raises all counter-offer options with you. The contract is negotiated, accepted, and the letter of intent is circulated to all parties.
Step 8: Finalize Details
Your business broker notes and observes all contingency periods throughout the in-contract stage. All financial and supple-mental information is collated and submitted to the bank and or qualified buyer.
Step 9: The Best Part
The property appraisal and inspections take place. The closing date is set with the title company and or buyer. Once closed, the transition period starts based off your contract. After transition period is over, you have finally sold your business and are on to the next adventure!