Top Tips for Selling Your Small Business

If you’re a small business owner you may already know that selling your business is no small feat. After investing your time and money into building your business, you want to make sure that all of your hard-work doesn’t go down the drain when you sell to a new owner. Here are my top 5 tips to help you sell your small business.

1. Be prepared

Ensuring that you sell to the right person, at the right time, and for the right price can be tricky to predict and execute. On average, selling a small business can take anywhere from 6 months to 2 years; you never know when a good selling opportunity will appear so it’s important that you are prepared by planning in advance.

A logistical way to be ready is by preparing all of the necessary documents. Gather tax return documents and financial statements from the past couple of years so you can review them with an accountant.

As well, you may want to organize a list of relevant contacts related to your business, such as key employees, suppliers, or service companies that you have used in the past. These should be contacts that are uniquely fitted to help your business run efficiently; contacts that you have a routine with and possibly rely on. This list can be given to potential buyers and help them have a smoother transition and continue to run the business in an organized manner.

Moreover, you may want to compile a document that outlines how the business is run. This may range from basic info on how technical machines are operated, to large descriptions of more complex procedures and routines. This will make it easier for business to carry on as usual and make it easier for your employees to continue their work as they would regularly.

2. Find the right price

Setting your price incorrectly (usually too high for inexperienced sellers) can seriously impact how long your business is on the market for. Before setting your price, consider getting your business valuated to add credibility to your asking price. This valuation should include things like any equipment that is being sold with the business or contact lists that are being transferred to the new owner. To ensure a credible evaluation of worth for your business, consider hiring a Certified Business Valuator. A business valuator will also calculate and predict the value of future success and how that factors into your business’ current value.

As well, make sure your asking price is competitive within marketplace prices. If you’re selling your business in a market that is over-saturated with similar offers, asking for lower prices, you won’t have a competitive market price.

3. Find the right buyer

Finding the right buyer can be difficult. Although selling your business can be a long and arduous process, make sure you’re not too rash when choosing who you sell to. Although your first offer may be exciting to receive, remember that it may not be the best offer. If you’re trying to protect the longevity of your business it is necessary to carefully select your buyer and choose selectively. As well, taking the highest offer isn’t always in your best interest either. Many owners hope for their business to continue to grow after they sell and want their leadership to be maintained, a hope not accomplished by selling to the highest bidder but rather to the best possible leader. These are all factors to consider when selecting your buyer.

4. Find the right person to help you sell your business

A business broker or an M&A advisor can assist you as an intermediary and help you sell your business. If you choose to use an intermediary, it’s important that you take the time to find the right one; I would recommend always interviewing at least a couple of options to help you assess the competition. Compare their fees and services, and evaluate who you think fits your needs best.

Using a broker or an M&A advisor can be incredibly helpful if you don’t feel comfortable marketing your business or negotiating selling prices with prospective buyers. Both options will help you sell your business for the best possible price; not only because they are professionally trained, but because they are also incentivized by working on commission to help you get the highest offer. Of course, although commission can be a great incentive for them to work harder, it can also mean that you may pay a hefty fee for their services.

All things considered, ensuring that your business is in good shape before you sell it will help you secure a better buyer and a better selling price. Using a professional intermediary can save you valuable time and energy that can be better put towards keeping your business in top shape during the selling process.

5. Know how to handle your profits

After selling your business it is smart to take a few months to organize your profits before making any large purchases. For many small business owners, your business was your life’s work, and you want to make sure that you manage your hard earned profits so they last. Following your sell you should contact your financial advisor to reassess your financial goals, your financial plan, and learn about potential tax consequences that may result from your sudden increase in wealth.  

 
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