When you are ready to sell your business, there are several initial steps that need to be completed right away. These include getting all of your financial information together so that it can be presented it the most favorable light and in an easily understood format. This should include sales records, quarterly or yearly income records after expenses, and asset descriptions with their approximate current worth.
If inventory is involved is the business sale; the records should be current, the method of evaluation noted, the purging of old or obsolete inventory and it’s total worth using your method of costing it out. The more accurate the records, the less likely the buyer will want a discount.
The overall appearance of the business should be spruced up so it will present a good first impression the first time the potential buyer sees the business. Key employees should be advised as to what is happening and given assurance that they will remain on the job for a specific period. The employee retention item will be part of the sales agreement.
Another part of the initial preparation is a list of all assumed debts or bills. This list is for the long-term leases that pass with ownership. It could also include any maintenance agreement that extends for a period of time.
SET YOUR SELLING PRIORITIES
Setting your priorities as to the sales price and how you expect to get the purchase price are mandatory. Everything flows from these numbers and terms that the owner arrives at, maybe with expert’s help. The selling price for your business should actually be two prices, what you will settle for in a cash deal and another price if you have to finance the deal. The initial asking price should be set a little higher than what you will actually accept so as to have negotiation room.
If you are willing to take payments for a period of time, you will have to come up with how long you want the payments to continue. Sometimes having a flexible term plan you are willing to tailor to the buyer’s needs make the sale happen.
The first question most buyers will ask is why are your selling a profitable business? You better be prepared for this question with a reasonable answer. The next important question is how did you come up with the selling price. Again this demands a logical sounding answer.
TIME TO SELL
Is this really the best time to sell or do you have no choice due to health or a death in the family. Some times getting another solid year of performance under your belt could make a big difference in the money you will receive for your business. Several consecutive stellar years in a row are impressive and will add to the creditability of your asking price. It will also validate that your business has a following and probably many repeat customers. This is very comforting to a potential buyer and makes them more receptive to your terms or price.
Any thing you can do to take the worry out of the picture by positive facts will go along way toward helping you come together with the buyer. Positive growth and an increasing profit curve are like honey to a potential buyer. That is why some times another year of operation could be the touch that is needed to get your price. Our article on Right time to sell your biz will help you with more info.
If you are not in a position where you have to sell, look at what another year could mean. If you are ready to let loose, that is a different matter. A motivated seller is what all buyers are looking for when in the market for a business. Motivated means willing to negotiate price, terms and even some short term partnership This seller type will do what ever is reasonable to make the deal fly.
CHOOSE THE PROS
Most businesses are sold with the help of a professional for a very good reason. The sale will probably go better as to time and price. The business broker handles many important details. This starts right at the beginning with coming up with a fair and reasonable price for the business. Many business brokers from larger outfits have professionally certified people on staff that can come up with a creditable price for the business that will stand close scrutiny by the buyer team.
A good business broker will have a ready list of buyers who are in the market for a business. If your business meets what they are looking for, then you have an immediate potential buyer. This could be very important if your business is one of a kind or would take a specifically trained person to run it correctly. There could be a need to be license in the business before you can open the doors. This is true in many areas in the construction business.
The critical area of the final negotiation is where you can use this experienced help to sell your business. A good negotiator is invaluable at this stage of the sale. The broker has done this numerous times and helped to make the deal move to completion. It is easy for a buyer to get cold feet at the last minute. A broker that has been around for a while will be able to handle this situation.
Actually a good broker will be involved in all stages of the sale from introduction to the final contract. This is part of their matchmaker magic.
Most business sales experts recommend that the pro be brought in early and listened to with a serious ear. Yes they are working on commission, but nothing happens if the sale is not made. The cost for this help cannot be looked at as unneeded when they introduce the buyer and help bring the sale along. Their advice on the selling price alone is worth hiring their services. A timely sale is far better than letting a business sat on the market for an extended period of time. It will easily become yesterday’s news and lose its freshness.
Conclusions
Conclusions about selling a business are many and each has a very important element in making the sale happen. Setting the price is critical since every other aspect of the sale flows from this decision. Hiring the pro to help with this and helping you gather all the information to make the sale possible is highly recommended. Advice from an experienced business broker can easily make the sale come to pass.
Another recommendation is provide accurate information throughout the process, as this will develop trust on the buyer’s part. It sets the tone for all aspects of the negotiation. A skeptical buyer is where most start, but by providing answers in a timely manner and as accurate as possible engenders an excellent way to gain a good relationship. This cannot be skipped or it will come back to create obstacles.
I guess the best advice here is to treat the buyer with the golden rule philosophy. There is everything to gain by being respectful to the buyer and nothing to be gained by doing the opposite.
Finally there are no dumb questions from the buyer. Some may be out of ignorance and some may be a set up. Take them all at face value.
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