Selling a business is a big step in an entrepreneur’s life. It can be a complex endeavor that requires a lot of consideration and organising. Buyers who might be interested will be curious as to why you’re selling your business, something you’ve built from the ground up and tended to. They’ll probably ask: Why sell and why now?
It can be overwhelming to even consider, especially with how much you have to arrange. Maybe you’re looking to retire or you want to move on to another venture—whatever the reason, it takes a ton of preparation to pull together your exit strategy. You need to be able to find buyers, systematise everything, and say goodbye to your team.
It doesn’t have to be such a formidable pursuit, however, as long as you’ve readied yourself properly. Taking the time to comb over your systems, your team, and how you operate can pay off. And remember that selling your business might be in your best interest in the long run.
When should you start thinking about selling your business?
Selling your business is a much longer process than you can imagine. It’s tedious, requires a lot of filing of financial records, and organising your business structure to survive without you. Because of this, you need to think years ahead of time, two to four years in fact, because of how much bookkeeping and systematising you need to do.
Some growth strategists even advise business owners to think even longer term—that is, at the very beginning of your business. You might not be thinking of selling something you’re working so hard on right away, but thinking of your business’ resale value from the very beginning can better guide you in terms of how you build and grow it.
Working efficiently and making sure your business stays close to its initial goals and objectives can help you with your business’ resale value down the road. While an exit seems like a faraway step to take, it can help you be more vigilant with bookkeeping, filing records, and organising a structure that can be sold more easily.
5 steps to prepare for a business sale
The process of selling your business can be laborious and require a lot of preparation, but it’s worth the extra time you spend on it. These five steps can help you sell your business for a good price.
Step 1: Seek the help of experts
Getting expert help can ease the stress of the very time-consuming process of selling a business—especially when you’re not well-versed in the fields that they’re veterans in. A lawyer, a broker, and an accountant are all important and astute assets when handing your business over to a potential buyer.
Advice from experts is necessary in a big move like this because they can provide you with more insights into your business, whether it’s legal ramifications, the value of your company, or someone to act as a conduit between you and someone who will potentially buy your business.
A lawyer will be able to look over your sales contracts and any other pertinent documents that the sale will need. Attorneys are able to assess the complexities of the paperwork needed to file and can aid you in any clauses that may seem unclear. They can ensure that you don’t lose your money and are awarded the full amount.
Brokers can negotiate with potential buyers and estimate asking prices while marketing your business without divulging that you’re selling it. Generally, you don’t want people to know that you’re considering selling your business because employees and clients will end up feeling anxious and questioning your reasons for selling. Brokers will ensure confidentiality while still showing off the good sides of your business.
An accountant is an indispensable and necessary expert you need to consult. Because they know the story of your business through its numbers, they can tell you what kind of shape you’re in and how to help the business stay its course financially. An accountant will also have financial statements you’ll need in bookkeeping. Lastly, they can also tell you the value of your business and when to best sell it.
Step 2: Find and identify potential buyers
Potential buyers may have different intentions for being interested in your business. Some of them may benefit more from the sale than others, leading them to pay a higher price.
Because of this, you need to dissect what they’re looking for in your business. Is it because they want to scale? Do they want to expand their market? You need to ask questions in order to find the highest bidder.
In order to find acquirers, you need to go out and build meaningful relationships with other business owners, clients, and even your employees. Networking can generate a potential buyer and communicating with them consistently can pique their interest in your business.
They will look at your profitability as a business as well as your market and if your customers are satisfied with your product or service. Buyers will definitely try to inspect and scrutinise your business to see if it can help them grow. Find the buyers who will gain the most out of the sale and your asking price can be much higher than expected.
Step 3: Improve processes
Keeping your processes smooth and streamlined can be difficult because of all the moving parts in a company. From production to distribution, there are potential hiccups that can disrupt how everything flows. Which is why perfecting processes and eliminating any hitches is a necessary step to making your business more attractive to acquirers.
Efficient production is something that buyers will look at when you’re selling your business. If your team is able to get things done quickly and systematically, buyers won’t have to worry about having to step in and fix things. They can trust that the systems in place will work even after the business sale.
One thing that needs to be done constantly is to review how these processes work. A lot of people say, “if it’s not broken, don’t fix it” but this isn’t always true. Not only does reviewing and analysing the systems in place help improve them, they also might reveal some more efficient shortcuts to get the job done quicker.
The advent of technology has also brought with it many ways to optimise tasks. So reviewing your processes can actually benefit you if, for example, there’s new software available that will reduce production time.
Step 4: Train your team to work without you
Because you’re leaving the team behind, you need to ensure your workers can still make good decisions and carry out tasks without you. A well-structured, independent team is more productive than one that constantly looks to their owner for decisions. Train every member to be more confident with their work, to learn from their mistakes, and to harness their skills to the best of their abilities without you having to look over their shoulder.
The goal is to have your team work independently and without constant supervision. Not only do you get more done, you also develop your employees to be more emboldened with their work. Let them learn from experience and don’t micromanage them. This is not to say you have to be completely hands-off right away, but to just slowly step away and let them take care of business.
Without you as the owner of the business, they should still be able to get things done thoroughly and comprehensively by themselves. Boost their confidence, give them feedback, and positively reinforce them in order to help them grow.
Step 5: Make sure all your documentation is flawless
Bookkeeping and filing paperwork can seem dull but it’s integral to the sale of a business. Having that history of your business filed away neatly and properly doesn’t only show that you are organised and meticulous (which are good traits to have in business), but it also tracks your gains and losses, your financial history, etc.
Having everything accounted for provides easy access to anything you may need. Say you need a report from last January. Given that you’ve put in the work to file everything, you can pull that report easily.
Documenting everything also includes your operations and processes. When you’re about to sell your business, you want to make sure that your operating manual is accounted for and properly filed. Transitioning the business can often be difficult, but with everything chronicled, it can help the new owner step in more easily.
With flawless documentation, you can hand over your business smoothly and without any hiccups.
Selling your business doesn’t have to be the minefield it seems. With these five steps in place, you can enter the business selling process with confidence and professionalism.
If you need assistance with the financial aspect of organising your business for sale, book a call with us.