As difficult as it was to build your business from scratch, parting ways with it can be an entirely new set of challenges altogether. But with all the time, sweat, and tears you’ve poured into the entity, you’d want to do every step of the process as accurately as possible to maximize your golden payday and to avoid any legal issues later on. Here is a step by step guide on how to sell your business the right way.
Identify Reason For Selling
Never sell without a clearly defined reason for doing so. CEOs have different reasons for selling their brainchild, be it to give way for retirement life, due to untenable partnership disputes, illness and death in the family, or even boredom and the desire to switch industries or product/service lines. Regardless, know your exact reason for selling before making calling people and making any final decisions.
Know Where You Stand Value-Wise
If you went through the process of identifying your exact reason for selling the business, you may have a good estimate of where your business is at value-wise. Selling a business that is not profitable and has accrued negative balance sheets over time will take much longer than a company that has proven itself throughout X period of time. Knowing the present and future valuation of your company also gives you a firm footing of what you should ask for and what you should accept from the opposing party. To get the most accurate valuation, hire a business appraiser. They will tell you what your business is worth with a detailed explanation to match.
Prepare For Due Diligence
If this is your first business sale, the phrase “due diligence” will probably sound like a foreign concept to you. In a nutshell, due diligence pertains to the investigation process of a business or individual before signing any binding contracts. Although it can be classified as a legal responsibility, most due diligence investigations are voluntary. Nowadays, people use a virtual data room due diligence to store and distribute files online. The virtual data room is implemented to oversee the due diligence process during several business transactions, such as mergers and acquisitions and loan syndication.
Consider a Broker
Working with a broker to sell your business has its own pros and cons. The most obvious pro is that it allows you to focus on the current business operations while your broker works on the legal aspects of the sale. On the other hand, selling it yourself can save money since you avoid broker fees. It really depends on your experience and expertise managing a business sale. Furthermore, if you are selling to a trusted person or business, such as a family member, friend, or current employee, a do-it-yourself sale is doable.
Find a Buyer
There are many different ways to find a buyer, but the tricky part is to get your marketing material out there. Staging and photography both play important roles when marketing your business to prospects. The right angles, lighting, and focus will ensure that buyers see the valuation and become interested enough to make you an offer. Construct a list of people who you think may be interested in purchasing your business or have shown interest in the past. It could be a former employee or business partner, CEOs who are in the same industry, or entrepreneurs who might find your business a beneficial acquisition for their existing portfolio. Before giving a tour to interested buyers, make sure to tidy up the place. Moreover, try to depersonalize the environment and make it more neutral so that the buyer can easily imagine themselves running and using the place.
Exiting a business can be as complex and tiring as it was when you first began it. Nonetheless, this is one of the pivotal times in your career as an entrepreneur that you must take seriously and with full resources devoted.