Selling a business is an exciting move that can be a big step in your career. However, the process can be complex and time consuming.
The length of time it takes to sell a small business depends on the size of the business, the current marketplace and how the buyer intends to finance the purchase. It can also be impacted by the way you handle your affairs and manage your financials.
Prepare Your Documents
The business sale process can involve a great deal of paperwork, so it’s important to prepare yourself ahead of time. Have legal and financial advisors review the documents you intend to hand over to potential buyers. They can help you determine tax implications of the sale and the best use of your proceeds.
During the courting phase, you’ll manage inquiries from prospective buyers and enter into negotiations regarding terms, price, and the scope of the sale. You may also need to sign nondisclosure agreements with interested parties so that sensitive information remains confidential.
Once you’ve found a buyer, you must complete due diligence to verify the buyer’s ability to finance the purchase and meet all other conditions of the sale. This stage involves drafting a sales agreement, and hiring a legal professional to oversee the process. It also includes preparing an inventory of company assets and property, and establishing ownership of digital data and software programs.
Review Your Financials
In the case of a small business, well-organized financial records can make all the difference when it comes to attracting buyers and facilitating due diligence procedures. In addition to offering transparent insight into a company’s profitability, these documents can help potential buyers assess risks and determine an appropriate selling price.
For these reasons, it is best to review your company’s financial statements and tax returns in preparation for selling your business. Your business broker and valuation expert will use these statements to prepare market value analyses and calculate an accurate sale price for your business.
Additionally, if you are planning on using an SBA 7(a) loan program to finance your business sale (which is common for most small businesses), the lending institution will require 3 years of tax returns from your business. Having these in place can save you time and money when it is time to sell your business.
Create a Marketing Strategy
When constructing your marketing strategy, you will need to understand your customers in detail. Doing so will enable you to build stronger customer loyalty and more effectively personalise your marketing messaging. It will also allow you to choose the right marketing channels and ensure that your campaigns generate a healthy ROI.
It is important to define your marketing goals and budget before you begin. These should reflect your company’s brand identity and your objectives as a business. Ultimately, you want to grow your sales and establish yourself as an authority in your niche.
Often, merchants find that following the 5 P’s framework is helpful to structure their strategy more methodically. This framework includes Product, Price, Promotion and Place, which are considered the key elements of marketing. This will help you determine your unique value proposition, conduct market research and understand your target audience at a deeper level. These insights will then help you to create and execute your marketing plan.
Find a Buyer
Choosing to sell a business is a major financial decision that has a direct impact on your legacy and your personal future. The right buyer maximizes your return on investment, safeguards your business legacy and helps you achieve your goals after the sale. Consider your readiness for transition and how you plan to invest or use the proceeds from the sale, as this will inform your timing.
A thorough valuation and document package will help you price your business accurately and avoid over or undervaluing it as you search for buyers. Streamlined business processes and documentation demonstrate a well-run business that is attractive to potential buyers.
Marketing your business for sale involves leveraging your professional network, online platforms and business brokers to reach a wide range of prospective buyers. Maintaining confidentiality and requiring potential buyers to sign non-disclosure agreements protects your business information and helps you weed out unserious inquiries. Business brokers also offer the benefit of experienced guidance and expertise throughout the sales process.