Last Updated on Dec 20, 2019 by James W
If you have decided to sell your business, you will quickly learn the process is no easy task. The process can be overwhelming and time consuming, involving many months to complete. It is recommended that you take one to two years to prepare your business to sell, particularly if you want to earn the maximum value.
Learning the fundamentals of selling your business for maximum value will help you to receive top dollar with the sale. While every business is different, the fundamental process is the same when it comes to selling a business.
Step 1: Valuation
To be able to sell your business for the maximum amount, you need to know the full value of the company. A professional valuation by a third party will ensure you find out the real value of your business. Having a third party complete the process helps to provide credibility to your asking price.
Step 2: Organizing Business Financials
The next step is to organize the financials of your business. You will need to show long-term viability to a potential buyer as well as the profitability of your business. Savvy potential buyers will want to see the full financial paperwork of your business. This will include equipment you own to real estate and regular business operation financial records. Having this information handy will ensure potential buyers have the info they need to want to buy your business.
Step 3: Increase Sales
If you take the recommended one to two years to prepare your business for sale, then you have time to increase sales. By increasing the sales, you will be able to reel in potential buyers. Buyers want to see that a business can continue to grow. Showing year over year growth before the sale can help you find a buyer to sign the dotted line.
Step 4: Time Your Sale
As mentioned, it is best to time the sale of your business. Planning it out in advance allows you to make necessary changes to ensure you receive the highest payout. By timing your exit, you have the ability to make your business desirable.
Step 5: Third Party Business Broker
Hiring a third party business broker places a guide by your side to help ensure the maximum value of your business is achieved. A broker can help you to find an ideal buyer, as well as conducting the business valuation, negotiation and due diligence within your business. A broker will be working for you to prepare your business for sale but also working to find buyers, helping them to secure funding, along with vetting the individuals to ensure the closure of a deal.
Step 6: Qualifying Potential Buyers
When it comes to a business acquisition, in general, the purchase will be funded by a third-party lender. Many transactions will fail due to the potential buyer being unable to secure funding. As the seller, it is essential that you qualify any potential buyer first before engaging. This will protect your time and effort as you will only be dealing with individuals who are serious and can close the deal.
If you follow these steps, you can be successful in securing the maximum value for your business. For more information, check out the infographic below provided by Colorado Business Brokers.