Making the decision to sell a business is one that requires a lot of consideration, planning, and an experienced representative. If you have recently considered selling a company, you will first want to consider the following factors. Evaluating each of these factors will help you decide if it time to sell or if you should sit back and wait.
The reason you are selling
The reason that you are considering selling is an important factor to evaluate. Needing to sell because of financial reasons can make it more difficult to accept a realistic price. Instead, you might be forced to sell at a lower price point to avoid bankruptcy or having to close the business altogether. You also don?t have the ability to wait until your competition is low. At any one time, there are 15 prospective buyers on the market for every one business listed for sale. If possible, it is always a good idea to wait until the right time to sell.
The year over year success of your business
If you thought, I want to sell my business after multiple years of profit losses, it might be harder to sell. If you were positive year after year in profits, you might have thought, I want to sell my business to take advantage of the profits. In this case, your business evaluation might be higher because you are expected to continue to grow and be even more successful. A business valuation is an attempt to estimate the company?s present value and the likelihood of future cash flows. There are three primary business valuation methods, asset based approach, earning value approach, and market value approach. Make sure you are taking all of them into consideration.
Who has equity in the business
Business mergers and business sales can get very tricky when there are multiple owners. Even if the primary business owner wants to sell, they might have to get approval from the other owners. Even a person that has a minimal ownership piece might be involved in the decision of whether or not to sell my business. Make sure you are on the same page with anyone else that has equity in the business to avoid any costly surprises.
Current business struggles
According to a report by the National Association of Small Businesses, the top three challenges of running a business are economic uncertainty, the cost of health insurance benefits, and a decline in customer spending. Consider the strengths and the weaknesses of your business and factor these into your chances of selling. A business broker is often able to bring you more sellers when you are fully aware of the different operating aspects of the business.
How to sell your business
If you have gone through all of the important factors of a business sale and have decided, it is time to sell my business, you are ready to list it on the market. You will work with a sell side broker that will handle the negotiations and communication surrounding the sale. Your business broker will also handle all transfer of information during the exploration process. Eventually, they will handle the closing process too.
Selling a business is often much more complicated than selling a house. In addition to factoring in the value and the current business market, you also have to consider your reason for selling, your business valuation based on three different models, and your current operations, profits, and losses. Working with a business broker that is familiar with the business sales market is the best way to begin the sale process.
