The process of selling a business can take several months or even years to finish. Due to the discrete nature of each stage, it is easy to commit an error that could result in a decrease in the amount of money you make from the sale, the transfer of control of your business to the wrong people, or an extension of the duration of the process. Hence, in this article, I will walk you through each step of how to sell your business, how much you can sell it for, and where you can do so for free online. If you follow these steps correctly, you will be able to sell your business more quickly.
How to Sell My Business
There is no universal formula for selling a business; rather, the process is tailored to the specifics of the company being sold. Smaller businesses have a lower informational threshold than their larger counterparts. No matter how big the business is, it won’t take long to sell it if you follow these steps and have help from a professional. Below is how to sell your business:
#1. Prepare to Put Your Business on the Market
Due to the extensive activities involved in selling a business, it is best to begin preparations years in advance. The buyer’s process of due diligence will examine all pertinent business data from the past three to four years. If you intend to sell your business within the next three years, now is the time to organize your financial and other documents. However, if you intend to sell this year, you should clean up any records older than four years.
#2. Set the Right Time for the Sale
Choosing the right moment to sell your business is one of the most important factors in securing a good deal. You should sell your business when it is profitable and the market is promising. It’s important to know what’s going on in your field at the time of sale. Start immediately to improve its condition if it is not already excellent.
#3. Hire a Professional to Evaluate the Worth of Your Company
When you want to sell a home, you get a real estate appraisal to back up the price you decide to ask for it. This procedure is not too difficult to carry out. Your real estate agent will look at recent sales that are comparable to yours and put a value on your home, taking into consideration factors like the roof, the size of the property, and the grounds.
However, to sell your business you will need the assistance of a specialized business valuation expert in order to sell your business. This is due to the fact that there are many different factors that can influence the price.
How Do I Calculate the Value of My Business?
Value of a company is easily calculated by subtracting its assets from its debts. Real estate, machinery, and stock are all examples of business assets with liquid, monetary value. A company’s liabilities consist of all of its monetary obligations to others, such as its commercial mortgage and any bank loans used to acquire expensive machinery and tools.
#4. Organize Your Financials
Buyers want profitable, long-term businesses in today’s economy. Many think longer and do their research before making an offer. Hence, b efore you sell your business, get your equipment, real estate, and business accrual-based financials in order.
Also, have an accountant or business consultant look over your income statements and tax returns from the last three to five years. List all inventories, supplies, intellectual property, and intangible resources you want to sell with the business.
Buyers want turnkey operations, so provide an operating manual or information about how the company is run. Also, ensure buyers can easily find and use all documents. You should be as transparent as possible so buyers know what they’re getting. These will save you time and trouble and tell the business’s history and future.
#5. You Can Use a Broker to Market Your Business
When you want to sell your business, there are essentially two options to consider: selling on your own or using a broker. You might be able to sell the business on your own if you’re selling it to a trusted family member or friend. This will allow you to save on commission fees.
In the enormous majority of situations, using a broker will be your best option. Are there any additional costs associated with this method? Sure there is! Nevertheless, a broker can help you obtain the best price and sell your business more quickly than you could on your own. It is also in their best interest to sell the company for the highest possible price.
#6. Find Pre-Qualified Buyers
The majority of new business acquisitions are partially financed by third-party lenders. And one reason why so many deals fall through is that the buyer can’t get financing after making a deal with the seller. Therefore, it is essential to prequalify prospective buyers before engaging with them. There are several questions you should ask a prospective buyer before deciding to do business with them. They include:
- Does the buyer have the funds? Ask buyers to submit income reports showing they can afford the deposit and the first six months of operations.
- Can the buyer run the business? Most qualified buyers are certified professionals.
- Does the buyer need time? You can ask potential buyers if they’re ready to buy right away.
#7. Seal the Deal Agreement and Finalize Legal Contracts
Once you’ve found a qualified buyer and agreed to an offer from that buyer, it’s time to close the deal. This is the point at which things have the potential to become a little bit confusing and messy.
Therefore, it is highly recommended that you have the vast majority of this stage handled by your lawyer.
#8. Develop an Exit Strategy
An exit strategy is something that every owner of a business needs to have. The most successful exit strategies are conceived of years in advance of the moment when the decision is made to sell a company.
You must have a solid exit strategy, whose development requires some time. Those of you who don’t have a plan for getting out of the situation yet still have time to make one. However, taking all of this into consideration, now might not be the best time to sell your company.
The last thing you want is to find yourself in a situation in which you believe you have no choice but to sell your business. Under those conditions, it is highly unlikely that you will be able to sell for the highest possible price. Things can occur. As a result, you should prepare for a wide range of possible escape routes by developing a backup plan.
#9. Handling the Profits
Give yourself at least a few months to save up the money you made from the sale. Make a plan outlining your long-term financial objectives and investigate the potential tax implications of your newfound wealth. Long-term goals, such as paying off debt and saving for retirement, should guide your decision-making when deciding how to invest the money.
You may want to see: BUSINESS EXIT STRATEGY: Things You Should Know
How Hard Is It to Sell a Small Business?
The sale of a small business can be challenging. In fact, it may be one of the most challenging tasks a business owner can undertake. According to one study, only 20 to 30 percent of small businesses that enter the market are profitable.
Can I Sell My Business Myself?
Yes, many business owners have sold their companies without a business broker, just as many homeowners have sold their homes without a realtor. Typically, business owners who sell do so for a profit.
How Much Can I Sell My Business?
The average selling price of a business is between two and three times the seller’s discretionary earnings (SDE). This is where the vast majority of sales fall. For example, if the annual cash flow is $400,000, a sales price of $600,000 to $800,000 is reasonable. Finding out how much your business is worth on the market is the first step in figuring out how much it might sell for. Your company’s worth can be estimated in several ways. One benefit is that you can put a dollar amount on all of your machinery, supplies, and other material possessions.
It can also be based on a comparison of current sales and profits to sales that were similar in the past. In some situations, earnings are multiplied using a predetermined formula. One or more of these can help you determine the value of your business, and from there, you can set the asking price.
It is essential to set a price that is not only affordable but also competitive. A price on the listing that is much lower than the current market value makes potential buyers suspicious. However, if you set the price too high, potential buyers may dismiss you as unreasonable and walk away without making an offer. There is a sweet spot where sales are swift and profits are high that you should aim for.
Where Can I Sell My Business Online for Free?
We are all aware that the digital age has changed how we conduct business. The technological revolution has made business ownership, operation, and sale more efficient. As a business owner who is ready to sell, it sounds like you are looking for the easiest way to sell. While selling online is possible and appears simple and inexpensive, the results are mixed. So I would not recommend placing all of your trust in the Internet. However, it can be used in conjunction with other methods of selling. Notwithstanding that, let’s examine how you can sell your business online for free.
The emergence and growth of social networking have significantly increased access to prospective buyers. It is relatively simple to sell your business online for free using social media, but difficult to do so effectively. So, If you have a vast network of well-connected individuals, this may be an effective way to promote your business. Unfortunately, if you do not invest in targeted advertising, your competitors and potential customers will quickly discover that you are trying to sell something.
When it comes to making professional contacts, there is no better social network than LinkedIn. LinkedIn is a great tool for locating and networking with prospective clients. Targeted ads can be purchased if you have enough money for marketing. You can use LinkedIn to contact strangers who share your industry and who may be interested in a merger, acquisition, or joint venture.
Also, you can reach out to people you already know who might be interested in purchasing from you on other popular social networks like Twitter, Facebook, Instagram, or YouTube. You can find other business owners who are looking to buy, or reach out to your existing network.
#2. Online Marketplaces
This is another place where you can sell your business online for free. Online marketplaces are websites that specialize in connecting buyers and sellers. Here are three of the most reliable business-for-sale websites on the Internet:
- Amazon.com
- Businessessforsale.com
- BizBuySell.com
#3. Business Broker Websites
Lastly, you can use business brokers to sell your business online for free. A business broker’s duty must facilitate a mutually beneficial transaction between purchasers and the vendors. To entice both buyers and sellers, some websites that act as business brokers provide free listings.
Example: Businessbroker.net
How Can I Sell My Business Without a Broker?
- Obtain a business valuation before beginning the process of selling your company.
- Obtain a business valuation before beginning the process of selling your company.
- In advance, you should get your company ready to be sold.
- Make a Memorandum of Confidential Information for Your Use (CIM)
- Have your attorney draft a non-disclosure agreement (NDA) for any prospective buyers to sign.
- Create a list of potential customers who are already part of your network.
How Much Is a Small Business Usually Worth?
The average range for a small business is between 1.5 and 3 times SDE. Higher earnings, rapid growth, and exceptional margins can all contribute to a multiple expansion. Secondly, the expected value of the business is determined by multiplying the SDE figure by the specified multiple.
In Conclusion
When you sell a company, you are also selling its concept. You are selling an investment in which you are well-versed. As a result, if you can maintain your level of expertise, you will be able to make an enticing sales pitch for your company. If the sale goes well, you’ll be in a good financial position to try new things.
References
- smallbusinessdeal.com
- nerdwallet.com
- investorjunkie.com
- nab.com
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