Ready to sell? Already dreaming of your retirement home at your desk? While selling your business may be the quick route to retirement, you want to be sure you’re getting a fair price and taking care of your employees along the way. Here are seven simple questions to ask yourself before you decide to sell your business.
1. Are my financials ready enough for me to sell my business?
It can take up to two years for your business financials to be ready for a market sell. Unfortunately, many companies aren’t willing to wait that long before buying. You’ll want to make sure your company finances from the past two to three years are complete and accurate. In fact, if you own a family owned business, you may likely need to consult a tax professional to avoid unnecessary write-offs and other sticky financial situations. Ernest prep work now, will prevent you from receiving low offers from companies who will under appraise your company later, due to insufficient accounting documents or unclear tax papers. As a bonus, by having proper financial documents, you’ll be more capable of determining a fair price when it comes time to sell.
2. Am I selling my business at the peak of the market?
Every owner wants to sell their company at the peak of the market. After all, who wants to sell a multi-billion- dollar company for just a few hundred thousand? Make sure that before you start negotiating, you know the possible future and possible failing of your company. No one can predict the future; however, you alone hold the most knowledge about your company. Make sure you don’t short-change yourself by selling too soon. The right time is when you know your business has reached the maximum potential with you as the owner. Once you know where that mark is, it will become easier to know the right time to sell.
3. Will I be able to keep my company running efficiently while I sell my business?
There’s nothing that will sour a good business deal than declining sales during the offer period. For you to be successful in selling your business, you need to be successful while selling it! The selling process will bring in extra work for you, so make sure you’re capable of handling the extra meetings, tours, visits, and other important events before you place your business on the market. Some firms even recommend hiring additional staff to deal with the increase in work. After all, if the first offer falls through, a successful business will be worth more during the next offer period.
4. When will I tell my team I’m going to sell my business?
Not only will you need a plan to sell, you’ll need a plan for who and when to tell of your selling plans. Ideally, your CFO will be alerted first, to allow time to prepare the financial documents you’ll need to provide. The remainder of your team remains up in the air. Many professionals choose to wait until a solid offer is on the table. Telling too soon may cause disruptions in your business, as your employees jump ship early to prevent a down-size. Telling too late may cause resentment, as your employees are given too small a window of time to adjust to the change. Establishing a plan now, of who and when you’ll need to tell, will save you an endless headache down the road.
5. If I sell my business will it continue to thrive without me?
If you run a business that fails the second you walk away from your desk, potential buyers will be scared to offer a fair value for your business unless you remain on as an adviser. If your entire business requires you to be present, or relies solely on one customer, you may need to slowly transition away from the business to prove to buyers your business is self-sufficient. Thankfully, this will mean less work for you, and a smoother, easier to run business. What’s not to love about that?
6. How long will it take to sell my business?
In every business owner’s head, there is a scenario where their business is sold in less than a quarter, earning them a fat check in their bank account, and a much needed restful vacation. Ideally, however, a business will take several years before it will sell on the market. Between preparations, documentation, independent appraisals, offers, and negotiations, the sale of a business can drag on for years until you receive a good, solid offer. Make sure to use a good adviser to help guide you through the process; and ignore advisers that promise quick sales. They are likely to be greatly under-valuating your business in exchange for the quicker sale. It would be better for you, and your business’ future, to hold out for the perfect company and the right offer.
7. Am I too eager to sell my business?
Being too eager to sell is just as bad as being too stubborn. Companies will sense your eagerness and exploit your desire to sell quickly, by making unreasonable demands and extremely low offers. If you need to step away from the business for personal reasons, opt to hire a competent CEO or manager to serve in your place while you wait out for a better offer. Choosing someone to act in your place will also clear up your schedule for the meetings, calls, and trips you’ll need to take to meet prospective businesses, and drive up offers for your business.
No matter your situation, every business will benefit from proper preparation during the business sale. While running a business can be a very rewarding experience, selling your business can be a very stressful and worrisome time. Be sure to research every offer and business with care, especially if you have a diligence to your employees. Asking yourself these seven questions can help unearth some areas where you may need to be improved before you begin to seek offers for your business..