You know everything there is to know about running your business but how much do you know about selling it and how to NET the most when you do? Have you ever sold one? How many? How successful was it? Did you have a sea of buyers competing for it?
As business owners we tend to think we have it all figured out. What if I were to tell you that almost all the business owners I speak to say they are scared to even think about selling their business because they don’t know how? I can help.
If selling your business is on the horizon over the next decade, you must read chapter three of Selling Your Business for Dummies. Don’t let the name fool you, it’s packed with all the information you would need to successfully position and sell your business. And it was co-written by Sunbelt, the world’s largest business brokerage firm.
You may ask, well, why don’t I just buy the book, position my business over the next five years, find the buyer, and negotiate the deal myself? Valid question, however, selling a business is both art and science. Not always does 1+1=2. Humans are involved and when humans deal with each other, emotions come with them. Deals die all the time and you must have a plan B, C, and D. If you’re not ready for that, it could be catastrophic. And finding a good buyer is just part of the process of netting the most when you sell.
Lucky for you, I am offering these tips. In sales, you only need one buyer. This holds true across almost all industries, nations, and demographics. The problem is, you need to find and entice that buyer enough that they write a great offer. If not, you’re leaving money on the table.
Clean Up Your Financials
Buyers pay the most for businesses with:
+ Ample cash flow and revenue (preferably increasing)
+ Enough cash flow to service the debt (if they take any out)
+ Enough cash flow left over to pay themselves a nice wage
Most business owners seek to minimize taxes, leading to company financials that do not show the true earning power of the business.
PRO TIP: Therefore before you ever show your company financials to a potential buyer have a Business Broker or M&A Advisor help you identify adjustments that reveal the true earning power of your business to buyers.
Contract and Legal Issues
Risk scares buyer and leads to lower offers. Be sure to settle any open legal issues before you go to sell. If you can secure contracts with your top customers, do it. Talk with your landlord about the course of transitioning ownership. Think about if you’ll need to hire a company to test the soil on your property. You can save a deal by having items like this checked off already. The book gets into much more detail on this topic.
PRO TIP: Review key customer and vendor agreements closely. Think like a buyer. Are these agreements transferable? Can you explain to a buyer why these relationships are unlikely to terminate?
Improving Your Curb Appeal
Common areas that business owners miss include websites, customer reviews, marketing materials, cleanliness of facilities, and more. Be sure to pay close attention to this section. Put yourself in the buyer’s shoes.
PRO TIP: Review your customer experience. From visiting your website, to the first phone call or visit to your business, is the customer experience excellent and consistent? Can you illustrate that to a potential buyer? The more you can illustrate your company has the systems and employees that deliver a great customer experience the more a buyer will pay for a business.