There is a lot of reason why business owners sell their business. Some of them are retiring and no longer want to run their business. Or some have been in a tight situation, and they need money. While a few soloprenuers have grown their business to the size, they can no longer manage it on their own.
The thing is selling your small business may or may not in your list today. But if ever you need to, you want to make sure you are getting the maximum price. Whether you are selling your business or thinking of it as an exit strategy, you must prepare your small business for sale.
Prepare Your Small Business For Sale
Before selling your small business, you must realize that you will need to position your business long before you (metaphorically) you put the “For Sale” sign out front. How you plan and grow your business is vital. You also need to make sure your business is not a cult of your personality; in other words, make sure it can run without you.
Here are a few things you can do to ensure that your business is desirable to potential buyers.
Keep Excellent Records
Any potential buyer will want to see detailed accounting records and an accurate customer list. How much revenue has the business brought in annually, and at what profit margin? What are your fixed expenses? These are all questions that you should be able to answer for a prospective buyer quickly.
What to do today: If you haven’t been keeping good records, start now. Make sure to enter each client’s contact details into your accounting or customer relationship management software. Please keep track of all of your expenses to know what it costs to run your business.
Document Your Processes
The more organized you can make things when you sell, the more smoothly the transition will go. Even if you’re no longer involved in the company, you still want customers to receive the same excellent service and products they always did.
That’s why documenting your processes and procedures can be so helpful to the new owner. Whether it’s your fulfillment process, handling a customer complaint, or even how you manage your hiring process, having each of these processes explained in detail will make your company sellable.
What to do today: Start by making a list of core processes that run your business. Leave no stone unturned: communications, marketing, inventory, customer service, accounting, hiring, etc. If needed, hire a consultant to help you.
Update Your Technology
Like you would add a fresh coat of paint to a house you were selling, so too should you spruce up your business before putting it on the market. If you have outdated computers on their last leg, invest a little now to come off as a cutting-edge company down the road when you’re ready to sell.
What to do today: Don’t replace all your computers and technology at once; instead, budget what it will take to upgrade and spread out your purchases. Talk with your CPA about when is the right time to make significant purchases to enjoy tax benefits. Keep your eye out for sales on computers and business equipment too.
Keep Building Your Business
Even if your heart is no longer in the game, you want your business to be appealing to get top dollar for it. That means you will need to continue to attract customers and grow revenues.
What to do today: Invest in marketing and advertising and work to upsell your existing customers to increase your margins.
Position Yourself as a Thought Leader
It never hurts to have the limelight shone on your business. One of the best ways to do that is by highlighting you as a thought leader in your industry. You can do this by writing guest posts on other sites, speaking at conferences, or writing a book. Yes, it’s you getting the attention, but you represent your brand, and your three seconds of fame will position your company favorably.
What to do today: Use HARO or hire a publicist to pitch yourself to the media. Find opportunities to get in front of your audience with your industry knowledge and share, share, share.
Calculate Your Business Valuation
Many entrepreneurs have no clue what their companies are worth and are surprised that no one wants to pay $10 million for their little small business! Business valuation isn’t an emotionally-driven process; it’s some multiple EBDA or Earnings Before Depreciation and Amortization, an exact formula that considers your revenues, expenses, assets, and other factors. Knowing what your business is worth now will help you set an appropriate price when you are ready to sell it.
What to do today: Hire a business valuation professional who can dive in to assess your business’ worth.
Pay Off Your Debts
If you have business loans, you will need to pay those back before putting your small business up for sale. No one wants to inherit your debts! If you still owe a sizeable amount, calculate how many months or years are left before you’d like to sell your business and figure how much your monthly loan payment would be. You’ll look better to a buyer by paying off debt as soon as possible.
What to do today: Start by not taking out any additional debt. Pay off credit cards —and work on building your credit score. That will be a significant selling point when the time comes to market your business to potential new owners.
Consider Who the Ideal Buyer Would Be
Even if you’re not ready to sell yet, you can help yourself by defining who the perfect buyer would be. Would you like them to be involved in the day-to-day operations, the way you are? Do you want a family to take over? Having expectations about the next owner can make it easier to move forward with the sale.
What to do today: Write out the characteristics of your ideal buyer. Who are they? What is their experience? It could be a current competitor.
Don’t wait until you are ready to sell to start positioning your business in a favorable light. Starting now on these tasks will ensure that you get what you ask for your business.