It might take months or years to sell a business
If you’re not careful. Because each step is different, it is easy to make a mistake that could lower the amount you get from the sale, put your business in the wrong hands, or slow down the process.
Getting a company ready to sell
During due diligence, the buyer will look at business data from the past three to four years.
Organize your financials and other records immediately if you expect to sell in three years. If you want to sell this year, clean up your 4-year-old records.
Is this important?
Indeed. Buyers want proof that a business is doing well and has value. They need enough information about the investment to judge it. This planning will also help the sale go off without a hitch. Without this data, it’s a gamble. No smart buyer would take that chance.
- Sort your finances and tax returns.
- Contracts, leases, etc.
- Get customer data.
- Keep track of business activities, organizational structure, and systems
- Display inventory and business assets in the right way.
When is the best time for a company to sell something?
Buyer interest in your business is affected by things like the economy, your industry, government policies, and regulations.
Interest raises corporate value
Timing is very important when selling your business. You are in charge of the things inside your business that affect its value and show when it’s a good time to sell.
Investopedia says that EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization, is a way to measure how well a company is doing financially.
EBITDA multiples are a common valuation model.
Depending on the size of the company, its multiple can be anywhere from 2 to 10 times. A business that makes $450,000 a year is worth $1.35 million. Figure out the cash flow at a discount.
Using a formula, you can guess how much a business will make in the future based on how much it has made in the past. Discount future earnings to what they are worth today. Is it free to do NPV calculations online?
Location, reputation or popularity on the Internet, competitive edge, brand strength, variety of customers, trademarks, established processes, etc.
They are hard to figure out, but you have to include them in the value of your business.
Self-Sell or Broker?
Not every time needs a broker. Selling a small business to a friend or family member you can trust. Most deals can’t happen without brokers. Because the deal is sensitive and needs a lot of care, you need a broker. They can give you more time to take care of your business and market it.
Most brokers take 10% of the selling price as their fee. Ask questions before you hire a broker to help you sell your business.
How will you tell people about this deal? —
Your broker needs a lot of ways for people to buy.
Can they get in touch with potential buyers?
What is the commission?
— Usually 10% of the price paid for your business.
Request additional cost estimates. How do you set the price for a business? How much should the price you ask for be different from the price you pay? See how well you have done? —
Check how well they have done in the past. Ask for references and testimonials from past clients. Do you have any more tips for using your services? Most brokers want you to sign a listing exclusivity agreement, which gives them the right to list your business for a certain amount of time.
Know this before you start.
If you find your own buyer, the broker gets 10% of the sale, even if it doesn’t go through. Talk about a carve-out. A carve-out is a restricted exception for a specific buyer prospect, such one you plan to bring in during the listing. Explore your broker deal’s details. By pre-qualifying buyers, you can avoid people who just want to look around. Use these questions to see if a buyer is qualified:
Can you pay for this?
Do you have business management experience? When will you buy? Get a financial statement to make sure the buyer can run the business for at least six months. If you talk to the prospect, you can avoid getting into a bad deal. If you avoid these time-wasters, your business sales will go up faster.
Note: Before talking about your offer with a potential buyer, have them sign a non-disclosure agreement (NDA) to keep your sale quiet.
How to speed up due diligence so you can sell your business
No one who knows how to sell a business quickly would skip due diligence, which is the longest step. With the right broker, lawyer, CPA, appraiser, and personal financial planner, as well as well-prepared paperwork, this should be easy for both the seller and the buyer. In this step, the buyer is getting to know your business and making sure it can meet their needs.
Business due diligence preparation takes time. It takes longer for bigger businesses. Get the paperwork ready before selling. To speed up due diligence and get your business on the market faster, you need:
- Financial documents like notarized income statements, itemized bills, balance charts, etc.
- Leases, consumer contracts, employee agreements, etc.
- Client base—reports, testimonials, contacts, etc.
- Operations and organizational charts: day-to-day business processes, management systems, customer relationships, vendors, software licensing, etc.
- Marketing includes things like businesses, market research, advertising, collateral, etc.
- Inventory and assets, such as equipment, real estate, inventory with problems, etc.
- Copyrights, trademarks, patents, trade secrets, etc.
Selling a small firm fast may require less due diligence.
The quickest way to sell your business is this:
- Consult experts
- However, 2-4 years before leaving, get ready to sell.
- If your company is making money, you should sell.
- So, before you close the deal, find out if the buyer is a good fit.
Sell your home-based service business? Acquira can help you make a smooth transaction that protects your employees, corporate culture, and business for years to come. Find out how much your business is worth and set up a time to talk.