Selling a business can be very hard. Not only is the actual process of preparing your business for a sale and finding a qualified buyer difficult, but selling something that you’ve put so much time and hard work into can be difficult as well.
Unfortunately, selling a business isn’t as easy as just throwing up an ad on Craigslist. The selling process can be both complicated and stressful. It’s why many business owners choose to work with a business broker or a franchise consultant. To get an idea of how the selling process works, the following are the steps that the owner of a typical business will have to take in order to sell their company:
1. Putting the Business in a Good Position to Sell
If business has been poor, it’s going to be difficult to sell. However, this may not necessarily be the reason that an owner is selling. Many owners will sell their business because they are retiring, they’re bored, they’re too ill to run a business, or they’re overworked. Whatever the reason, they should expect potential buyers to ask why they are selling.
To make the business more attractive to potential buyers, owners should try to increase profits, earn consistent income figures, and establish a strong customer base. By ensuring that the company’s business structure and financial records are in good shape, potential buyers will be much more willing to buy the company at the price that’s been set. When the company’s in good shape like this, it will also make the transition easier for the buyer.
2. Determining the Worth of the Business
There are a lot of factors that go into the value of a business. Pricing it too high will scare away potential buyers while pricing it too low will lose the owner money. Factors taken into consideration include the financial state of the business, the growth of the business, the current market and more. A good business broker can help determine an accurate price for the company.
3. Preparing All of the Documents
The owner will need to gather together all relevant documentation regarding their business. This includes financial statements and tax returns that date back three to four years (unless the business isn’t that old). An accountant will have to go through these documents to make sure everything is in order. Additionally, the owner will have to create a list of all the equipment that’s being sold with the business, a list of contacts relating to sales transactions and supplies, lease paperwork and more.
Owners should also create a packet that describes the operation of the business. Buyers are going to want to see this information before they provide a bid.
4. Making Repairs and Updates
Just like a home, a business has to be in good shape to attract buyers. Any repairs or updates that are needed should be performed.
5. Finding a Buyer
This may be the hardest part of the sales process—the actual sale. Owners will have to market the sale of their business in various publications and on various websites in order to attract the attention of potential buyers. Not only will they have to find buyers, but they will have to pre-qualify them. The last thing an owner wants to do is waste time negotiating prices only to find out that the buyer isn’t financially capable of making the purchase in the first place. They need to be pre-qualified for financing before the owner even provides them with information about the business.
If the buyer is pre-qualified, then the owner may need to negotiate the price and terms. The negotiating process can be quite difficult for both parties, especially for owners who are emotionally attached to their business. If an agreement is made, it must be put into writing.
6. Closing the Sale
After an agreement has been made, the sale must be closed. This step will involve an abundance of paperwork, all of which can be quite overwhelming.
As you can tell, the process of selling a company is not exactly easy. It can be especially difficult for business owners who have little to no experience when it comes to selling a company. Because of this, many owners will turn to a business broker or franchise consultant for professional guidance. Business brokers can help owners with every step of the sales process, thereby freeing up time that the owner can use to make sure their business continues to run smoothly up until the sale.