6 Rules to Selling a Business

If you want to sell your company, there are some “rules” that you should consider in order to have a successful transaction.  Selling a business requires discipline, a sound strategy and strong advisors.  While these ‘rules’ won’t guarantee that your business will be sold, they are certainly some key points to think about.

Prepare yourself personally for the sale
Think about the challenge that is involved in selling a company.  The transaction is much different than a real estate deal and it does involve patience and perseverance.  Are you truly ready for the work that is involved to sell your business?

Prepare your business for the sale
One of the biggest issues that befuddles business owners is that they do not properly plan a clear exit strategy from their business well in advance.  Talk to your chartered accountant and lawyer, get your financial documentation in order, claim all of your “cash” sales, renovate if necessary, and so on.  Also, if you can implement some strategies to improve growth or profitability do so.  It is better to show actual growth to buyers instead of simply talking about the theoretical “potential” of your business.

Don’t wait too long to sell a business
Selling your business while it is still growing or while it still has much upside left is advisable.  Too often, business owners wait a few years too long, past the point that they “should have sold” and realize that the value for their business may have declined.  Timing is everything – especially in a business sale.

Run your business properly
Don’t lose focus when you list your business for sale.  Selling a business is a time-consuming process and it is possible to focus so much attention on the process and neglect the actual business that is being sold.  Work with a business broker to sell your company so that you can focus on the operations.

Be reasonable about the selling price
It is one thing to get as much value as you can from your business when you decide to sell it – it is quite another to be unrealistic about the selling price.  Talk to your advisors to get a sense of what a fair selling price is.  A business broker, business valuator or possibly a C.A. can help you with this.  If you are unhappy with the recommendations of your advisors regarding your company’s value then implement steps to improve the business so that you can ask the selling price that you really want to.  Simply setting a high price on your business and “waiting” for a buyer to come and purchase it is not a sound strategy.

Be flexible during negotiations
Selling a business means you will need to eventually enter into a negotiation with a buyer.  Be flexible during the negotiation and try to compromise on the items that aren’r “deal breakers” to you.  For instance, if the selling price is an issue then perhaps you can meet in the middle, or perhaps offer some additional vendor financing to make the deal more palatable to both parties.  Perhaps the buyer is from Toronto and your business is located in Hamilton, Ontario and the purchase is not completely familiar with the local market – you may potentially want to increase the training period to better acclimatize him or her to the local customers.  The point is, be prepared to budge on deal points that you are willing to bend on and offer creative ways to add value to your purchaser.  Give and take is a good approach to take.

Selling a business in Canada is a process that many business owners are not totally clear on.  Work with a business broker and other professionals that can guide you through the transaction and try to plan your exit strategy as early as you can.  You’ll be surprised at how much work selling a small business can really be!