How to Prepare to Sell Your Business
Starting a business is just one aspect of your journey in entrepreneurship, as is keeping operations running smoothly. However, depending on the course of business and life, you may decide that it’s time to close or sell your business. Selling a business requires more nuance and planning than just deciding to cease operations. There are more steps to take and it’s simply a longer process with more people involved. Here’s what you need to do in order to prepare for selling your business or even just contemplate whether this is a move you should make.
- Determine the exact reason why you’d like to get out of your current business. Regardless of how you’re going to get out of owning and/or operating your business, there has to be a reason why you’d like to move on from it. Are you getting ready to retire or are you nowhere near retirement but would like to just move onto something else? Is your business missing some key component that you’re unable to execute or invest in, or is it just not profitable? Finding a buyer for an existing business is already a challenge and your reason for selling also factors in. A business that isn’t too profitable will be a harder sell than one that has more promise.
- Start your business sale and succession plan as far in advance as possible. As all business owners know, you can’t easily walk from it the way that one does with a job that’s not working out. After you’ve figured out your reason why you’re selling, making your plan to sell far in advance will give you more time to address glaring issues that could detract buyers (such as poor profitability).
- Gather up a list of all important business documents potential buyers need to see. Do you have any licensing or sales agreements that will still be in effect after your departure? For your fixed assets like equipment and buildings, are they in good shape and do you have your leases or deeds to these assets in a place that’s easy to find? Potential buyers need to be made aware of your total assets and debts as well as the business environment you’ve fostered. They will also want to see up-to-date financial statements, tax returns, and all other documents related to your recent performance in addition to historical financials.
- Find suitable venues for seeking out buyers. You may have both local and online business groups that can serve as a good start in addition to your network, but also need to check into business publications dedicated to business buyers. There are also professional agents for selling businesses who you may wish to work with and then you need to factor their cut into how much you reasonably expect to get from the sale. It can take a while to find a buyer, so you want to keep your options open.
- Have a business valuation done. You’ll need a professional business valuation engagement before talking to potential buyers. This is performed by a valuation expert who is independent of your firm where their job is to place a literal price tag on your business based on performance, location, brand recognition, assets, labor force, and other factors. Serious buyers won’t consider your company without a professional valuation.
- Prepare for a lot of paperwork! When you sell a business, you’ll be filing a lot of paperwork and spending a lot of time filling out forms. You need to have a good lawyer and accountant on deck in addition to your valuation expert. There will be tax and legal forms, business license paperwork, and other bureaucracy up ahead.
Rue and Associates’ financial and business professionals can help you chart out a business sale and succession plan that fits your personal and business needs. Contact us today to speak to one of our friendly and professional business experts if you’re contemplating selling your Richmond or Mechanicsville business.