Whether you started your business with the intent to sell it one day or have simply decided it’s time to move on after years of hard work, many business owners eventually want to sell. Sometimes the potential buyer is right in front of you, like a co-owner or employee with sufficient purchasing power and the necessary expertise to seamlessly step into your shoes. If not, you can take several important steps to make your business more appealing to a wider audience, increase its value in the marketplace, and help facilitate a smooth transition.
The first place to look are your business records. Potential buyers will want to review documents like tax returns, profit and loss statements, balance sheets, cash flow statements, accounts receivable, and accounts payable. If you already have excellent record keeping practices, then you are in good shape. If not, then now is the time to make a change. Consider seeking professional help from an accountant or other qualified financial expert to organize your books. These records will show potential buyers how much your business has prospered and give them a good idea of its future potential.
Next, you will want to look at your operations from an outsider’s perspective. If your business is turnkey and will not require long hours or extensive hiring for the new owner, then it is inherently more valuable and easier to sell. Have you developed a loyal base of customers? Do you have marketing in place to acquire more? Are your employees happy at work, and do they do a good job? Will the existing team be able to continue providing great service to current and future clients, even if the company is under new ownership? Does your business have solid relationships with important vendors and other third parties, separate from you as the owner? Do you have thorough written policies and procedures, handbooks, and training manuals ready to go? Have you secured valuable intellectual property, like your business’s name and logo?
Taking these steps can enhance your business’s value. When the time comes to determine a sale price, you can choose from several methods of valuation. These may vary by industry, especially if your business is unique, but in general you can use annual revenue as a way to determine your business’s value. One common calculation looks at recent sale prices of similar businesses compared to their annual revenue. You can price your business based on these sales by plugging in your own financials. Then you can examine your business’s other strengths, like the soft factors described above, to determine if buyers might pay an additional premium. A professional business valuator can offer assistance in obtaining a fair and appropriate valuation that you can trust.
Finally, it’s important to discuss your plans with a team of experts, including an accountant, an attorney, and other trusted advisors, like a mental health professional or business coach. You might discover that it does not make financial sense to sell your business at this time. Maybe you can find another way to step back if you are suffering from burnout or lack of interest. If the time is right, though, then your team will help you through the next steps. If you are interested in learning about my experience as a corporate law attorney assisting business leaders and entrepreneurs in our community, please email me at email@example.com or call me at 407-647-7887.