Selling your business can be difficult, a long process and be emotional. There are steps you can take to help smooth the process and there are certain external professionals you should consider consulting with.
The first thing you probably want to know is how much money will I get. A quick way to ballpark the price of the business is three times cash flow after all expenses and taxes. If your business nets you $100,000 per year, a good starting price for the business is to sell for $300,000. Everything is relative however.
First, consider your situation. Why are you selling? This is one of the first questions any potential buyer will ask. Retirement, overworked, relocating, family issues or just other interests are all valid.
Your reason will affect the urgency in which the deal must complete. Selling when you do not have to sell is the best place to be in.
Prepare to sell your business long in advance, at least a year. Really, try hard to push the business to sell on a strong year. You want to show that performance of the business has been increasing year or year. Get everything in order. Write down everything you plan to include in the sale. Include inventory, supplies and equipment. Are you willing to offer training to the buyer? Are you willing to finance the purchase?
- list all inventory quantity, purchase date
- equipment purchase, value
- assets the company owns
- lease agreements
- develop a summary of the business, tell its story
- give some ideas of what a new buyer could do to grow the business
Review all your financial records with your accountant. Potential buyers will look at how strong the business is. They will want to review all your financials. I hope that you have kept good records.
You can sell the business yourself or hire a broker to manage negotiations between buyer and seller.
You will need a lawyer to develop and help complete contract.
To help set a good price you can get your business appraised. An appraisal from a third party will be much more credible and strengthen your negotiations.
Market the sale
Advertise everywhere you can. You never know where the buyer may come from. It could even be one of your existing employees who buys your business. It is important to have the right team so one day they could take over the business
Put everything in writing
All potential buyers need to sign a nondisclosure/confidentiality agreement to protect you. At the same time buyers may ask you to sign a non-compete agreement so you do not start up another similar business and steal customers away.