It’s not uncommon for entrepreneurs to reach a point where they want out of their business. It can be difficult running a company, and many owners are ready to move on after years or decades at the helm. But before you jump ship, there are some things you should know about how the process works so that you can get the best possible deal when it comes time to sell your business.
1. Get Ready to Sell Your Business
You can’t simply give away the keys and call it a day. Before you begin negotiations, you need to evaluate your business and identify what needs improvement before someone will want to buy it. This is often referred to as ‘getting your house in order.’ Look at all areas of your business, from the financials to the customers and beyond. Make it stronger and more appealing if you want a great deal on your company.
2. Set the Right Price
Sure, you know what you paid for your company (or how much debt you incurred), but that might not be what someone is willing to pay for it. You need to find out if your ambitions and desires line up with the market. How much is a company like yours worth? An appraisal can help you determine that number, and it can also give you insight into how to position your business for maximum interest from potential buyers.
3. Pick the Right Broker
Brokers are similar to agents in Hollywood. They often have inside knowledge on who’s looking to buy and how much they might be willing to pay. Your broker can also help you determine which prospective buyers are legitimate and prepare you for what will happen during the negotiation process. They can also help you determine what your business is worth and might even be able to help you get a higher price than if you tried to sell on your own. Since only 20% of businesses listed for sale actually sell, a broker can be helpful in making your business actually sell.
4. Get Ready for Due Diligence
After you receive an offer, the buyer will do a thorough examination of your company. This is known as due diligence, and it can be harrowing if you aren’t prepared for it. You’ll have to allow potential buyers access to your company’s financial records and even provide them with confidential information about customers and employees. If you can accept this as part of the process and keep your cool, it may make a good impression on potential buyers. Remember estimates show that at least half of all agreements between a buyer and seller collapse during the due diligence process and never close.
5. Keep Business Going During Negotiations
If you’re hoping to receive a great deal for your company, you need to stay in business throughout the negotiations. If buyers see that sales are down and expenses are high, they might think you’re desperate and offer a low price. During negotiations, you’ll often be asked to lower your price, but if you can keep things afloat while waiting for an answer, the buyer will likely meet your terms. The larger your business is, the more likely it is that it will sell, so keep that in mind as well since one-third of businesses with over $30 million in annual revenue do sell.
6. Identify Your Goals
Are you most interested in getting the highest price possible? Or do you want to line up a buyer who will keep your company afloat and preserve the legacy you’ve built? It helps if you know what is most important to you before negotiations begin. You might not get everything you want, but it might help in terms of at least getting an acceptable offer.
7. Negotiate Until It’s a Deal
You might have a price in mind, but your buyer might not match it. That’s why you need to negotiate until something is agreed upon. While this can be tough to do, if you look at negotiations as just part of the process, it may help calm your nerves and allow you to have a productive dialogue. The more you can get the buyer excited about your business, the better off you’ll be when it comes time to seal the deal.
You can’t just list your business for sale and wait around for the phone to ring. You need to take action, identify potential buyers and get ready to haggle. Remember, if you’re looking for the best deal, working with a business broker might be the smartest move.