Questions to Ask Yourself Before You Sell Your Business

For a successful business sale you have to be behind the process 100%.    For a successful sale you must be sure that selling is the right decision and not be second guessing yourself.   So ask yourself some hard questions:

Am I Serious About Selling?  

Deep down do you want to sell or are you just going through the motions?  The answer shouldn’t include a ‘maybe’, or a ‘might’. You have to be motivated and committed. The process requires the same level of drive and focus you’ve applied to building your business up until now.

Why Am I Selling?  

When you have a good reason to sell you will be more focused and more likely to achieve the desired result.  You may be keen to retire, change career, have had a health scare, a change of business or personal partner, you may be unprepared to provide the additional funds needed to keep your business moving or you may just want a capital gain on your investment.

Am I Willing To Meet The Market? 

Whether you are selling a house, car, boat or business, if you are realistic with your asking price, you will achieve a sale quickly and usually without having to discount the price as buyers seek a reduction against time on the market.  Asking price and sale price are two very different figures. Before you list your business for sale, if you hire a business broker, they will explain that any advertised selling price will be regarded by potential buyers as a starting point for negotiations. Many business owners do not have a realistic idea of the value of their business. In some cases, they under value and in other cases over value their business.  If you go into the sale process with unrealistic price and terms expectations, you may expect to receive little to no interest in your business. Therefore, it is important you receive a full business appraisal before you list your business for sale.  An experienced business broker (that will be me) will be able to complete one for you.  Businesses put up for sale through brokers generally have a much higher listing-to-closing rate compared to those listed directly by business owners. 

Do I Have Accurate And Up To Date Records? 

Anyone wanting to buy your business will want to look at financial statements, lease documents and other paperwork, just as car buyers will look at the service history of a car.  So have everything ready for the first day your business is on the market.  The first buyer is often the best buyer.  Too often business owners assume that as long as their business is performing well, then it is ready to sell, with no preparation needed. This is certainly not true, especially if you want to maximise your selling price. The sales process will involve a rigorous examination of your business and its track record. Successful business owners often spend months positioning their business, compiling financial records and putting systemised processes in place to ensure their company is ready for sale.

Do I Have A Realistic Time Frame? 

Don’t expect a sale overnight.  It may take time to identify the right buyer, negotiate the best deal and to satisfy any special sale conditions.  Be patient and don’t appear over anxious or desperate.   While some businesses do sell quite fast, it can take a period of months to attract the right buyer and close the sale at a good price. A common rule of thumb is that it can take somewhere between 4 to 8 months to sell a business. This may seem like a long time, but the simple truth of the matter is that it takes time to find the right buyer who will pay you an appropriate market price and to whom you will be comfortable handing over the reins of your business.  Most business owners can only deal with one buyer at a time but a business broker can expose a business to numerous potential buyers to increase the chances for multiple offers and the best price in the shortest time frame.

Have I Picked The Right Time To Sell?  

The optimum time to sell is just before your business is at its peak.  So it is important to make plans for a transition before signs of burn-out, apathy and lost opportunity appear on your financial statements.  If you know that retirement or change in circumstances is imminent, start making plans to sell well ahead of time.  The reality is that most buyers will require some form of finance to purchase your business. Even for the most experienced business owners and purchasers, they will look to leverage the use of funding from elsewhere as this makes the process of purchasing more efficient for them. Remember, that it is in your best interest to help them through this process as this may be the difference between them completing the purchase or not.  Accounts showing little profit are great from a tax point of view but not good when it comes to determining the value of the business you’ve built.  Have your accountant re-cast your financials to reflect adjustments for what you take out of the business in terms of salary, health, car (Boat?) expenses, travel etc.  You will want to show the purchasers bank your business in the most favourable light possible so as to give your purchaser every chance of successfully funding the purchase. 

Am I Willing To Use The Help Of An Expert? 

Many business owners will only sell a business once or twice in their lives, so use lawyers, accountants and business brokers (this means me) experienced in business sales.  They know the details that can affect the sales process and can guide you to a successful sale.  Many business owners believe they know how to sell their business because they have been the main salesperson in their business for many years. However, selling your business is not like selling a product or service. It can be particularly hard for business owners to put aside their emotional attachment and this can adversely affect buyer negotiations.  

Selling a business can be a full-time job and the demands can add stress to an owner trying to juggle both the sale and the running of the business. Throughout the selling process, clever business owners keep their businesses fully operational and add touches that would bolster the potential for a top of the market price.    Furthermore, confidentiality is lost, which means you risk losing clients and employees – the very goodwill you are trying to sell! It’s difficult to vet potential buyers without revealing your identity, if, as a business owner, you choose to deal directly with buyers. This is where the services of a professional business broker can offer you valuable strategic advice and increase your chances of selling your business for a higher price.

As soon as you start thinking about selling up, start planning for it.