The first step towards successfully selling a business is finding a qualified business broker to work with. Sellers should also ask themselves important questions about their motivations for selling. Freelance writer Troy Lambert outlines some crucial questions in an article published recently by Unbound Northwest and the Good Men Project.
1. Are you ready?
Such a simple and powerful question: “Are you ready?” For example, are your financial reports ready to show? If you’re like most businesses, your accounts are set up to provide the best tax advantage, but that usually doesn’t show all the money you make or have the potential to make. To get top dollar for your business, you’re going to have to “recast” your books, usually with the help of your accountant.
2. What’s the business worth?
3. How healthy is my industry?
Prospective sellers should be brutally honest when they answer this question: “How’s the health of my industry?” You’d better believe that your broker, bankers and prospective buyers will be asking this question as part of their due diligence. If your industry is in a transition period, for example, then it might be better to wait until a better time to sell.
4. How long will it take?
Selling a business can take a long time. If you need to sell quickly, you are likely to get less money and less favorable terms. Successfully selling your business may even mean that you have to stay on and work with the new owner during a transition period. The process can take a year or more, so plan for that.
5. Who is my buyer?
You don’t want to waste a lot of time with potential buyers who are simply not a good fit. Professional business brokers understand this and will prequalify buyers, ensuring they have the finances to buy your business and the right skills or certifications to run the business. Finding the right buyer for your business helps to ensure that a deal will be finalized. Brokers also understand the necessity of confidentiality in marketing your business.
6. How will I get paid?
Even if you get your asking price, you may not walk away with a wad of cash. Before you put your business on the market, decide how you want to be paid and how flexible you can be in terms of payment. Are you willing to finance part of the deal? Will you accept sales-based payouts? Balloon payments over time? Payment in the form of stocks or a stake in the business?”
For most sellers, selling a business will stand as the largest financial decision of their lives. With this realization comes more than a little pressure.
Having good advice is critical to a successful sale. A seasoned and experienced business broker understands what it takes to buy and sell a business. Working with a business broker is an easy and efficient way to begin the process of selling your business. Brokers know what it takes to successfully sell a business and can help you answer these questions and many more.
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