5 Ways to Prepare for Selling a Business
If you are thinking about selling a business this year, here are five ways to make your small business even more attractive and investors.
Now might be the perfect time for selling a business.
While sales for small businesses lagged behind, sales of small businesses increased almost 50% in 2013, the fastest pace of business turnover since 2008 – before the Great Recession. The Washington Post reported that more than 7,000 small firms changed hands in 2013 compared to just 4,700 small businesses sold in 2012. Are you thinking about selling a business this year?
Another sign of recovery – that’s what analysts are saying about the big increase in number of small businesses that were sold in 2013 compared to the previous year. With a nearly 50% increase in sales of small businesses overall, retail and restaurants led the way, with sales of those types of small businesses up more than 70% compared to 2012.
It seems to beg the questions, how can you know whether “now” is the right time for selling a business, and how can you prepare your business to better attract buyers (or even investors).
4 Signs the Time is Right for Selling a Business
Why Do You Want to Sell?
First, if you are considering selling your small business, why are you doing so? Knowing what you want to do after the sale of your business can help you determine whether now really is the opportune moment to sell, or whether you should hold on a while longer.
Do You Know Who You Want to Take Over?
Unless your business is going to be dismantled or absorbed by another entity, it’s important that you identify an ideal buyer type before you decide to sell your business. Doing so will help preserve your legacy, reputation and will also help to ensure that you don’t leave your employees in the lurch.
When interviewing prospective buyers (or investors), ask what they plan to do with the business, what their vision for the future of the company is, whether they have a marketing or business growth plan , and evaluate whether their values are a good match for the organizational culture you have created. You may even want to verify the information they provide with third parties, such as personal references.
Who Else Will Be Impacted if You Sell Your Business Now?
If you have business partners or investors, you might need to get their buy in before putting your business up for sale or you may need to buy them out.
Other parties that could be impacted if you sell your business include employees, other businesses located near yours, vendors, community leaders and – of course – your customers. Make sure that you have a plan for communicating with each at the right time so that they can adjust their own plans accordingly.
Do You Know What Your Business is Worth?
It’s possible that you may undervalue or overvalue the worth of your business for any number of reasons. Investing in a professional evaluation of the worth of your business can help you decide whether now is the right time to sell (and for how much) or whether you need to increase the net worth of your organization prior to looking for a buyer.
If you have decided to sell your small business and you want to increase its value to prospective buyers, here are five ways to help boost the worth of your organization:
5 Ways to Increase Worth Before Selling a Business
Improve Cash Flow Before Putting Your Small Business Up for Sale
Prospective buyers that intend to take over your business and keep the doors open will want to know that your business is not just profitable on paper; they will want to know that your business produces adequate cash flow to cover expenses and invest in growth strategies.
Make Sure Key Positions Are Filled by Competent, Qualified Employees
Prospective buyers that want to hit the ground running, retain customers and keep the business on a track for growth will have more confidence about buying your small business if they know that experienced, accomplished professionals are already in place. While some employees may decide to leave when management changes hands, many will probably decide to stay on – at least for a while – to see what happens.
Max Out Profit Centers
Before you put your small business up for sale, focus your marketing tactics so that you are getting the most sales from the most profitable areas of your business. This will help boost the value of your business and contribute to improving cash flow as well.
Put the Business Plan on Paper
Many small business owners never get around to writing a formal long range plan for their business. Taking the time to write a business plan, including a strategic marketing plan, and identifying market threats and opportunities for the next owner can go a long way to showing them why they should invest in your small business, compared to other opportunities or startups they may be considering.
Think of Buyers as Your Most Important Customers
Think of your prospective buyer as your most important customer. This is the one customer who needs to understand the mission and vision of your organization and make it their own. This is the one customer who needs to fully understand why they should do business with you, and eventually, in your stead. The prospective buyer is the one customer you most need to identify with the brand of your small business.
Is now the right time to sell your business – and is your business ready to attract buyers and investors? Whether you are creating a succession plan for your business or planning to sell it this year, these ideas can help you decide what the best decision is for your organization.
