It is now easier to sell your own business than ever before. The question “can I sell my business?” is no longer one that leaves business owners scratching their heads as the internet has revolutionised the way businesses change hands today. You no longer have to hire an agent or business broker to find a buyer for your business; in most cases, they can be expensive, they can be slow and in a lot of cases, they have several other businesses on their books that they are looking to find buyers for. By following the 8 steps below, you will be able to sell your business privately and without having to spend a lot of money.
1. Prepare Forecasts, Financials & Business Plans
When you decide to sell a business, it is your job to make sure that the prospective buyer can see that it will be profitable. The only way you can do that is to prepare detailed forecasts, financials and business plans. The forecasts tell prospective buyers what they can expect to get after they buy the business and the business plans tell them how to proceed.
The financials are a record of how your business has performed in the last year and they are also proof that what you have put in your forecast can be achieved. How long into the future your forecast goes will be determined the size of your business. A small one can go 2 or 3 years in while a medium sized one can look ahead 5 years. Make sure that the financials are as accurate as possible and that they cover all areas of the business. Your accountant should be able to help with these but if you don’t have one, there are many freelance accountants that you can easily hire.
2. Decrease Your Overheads By Cutting Unnecessary Costs
If you want to stir an interest in prospective buyers minds you must display in very practical terms that you have low overheads and overall costs. When they come in to assess the business, they will want to see that you have kept costs under control and that they are not going to go broke or drown financially because of unnecessary overheads. Cut off any expenses that are unnecessary. This includes payroll, stock, everyday costs and overheads like rent and cost of production.
You don’t have to cut costs all at once; it could cause confusion which will lead to losses. Draw up a plan that shows a gradual decrease but make sure that by the time you are ready to open the business up for inspection by potential buyers that you have cut all of those unnecessary costs and that the business that you are selling can comfortably turn a profit.
3. Ensure Your Business Marketing Strategy Is In Place & Makes Sense
Marketing is the heart of every business and no one wants to buy a business and jump right into problems with a poorly thought-out marketing strategy. Take the time to create a plan that is foolproof and that is sensible. You should tap into the middle and upper level of employees to squeeze any thoughts or insights that they may have as these staff are at the front-line of your business.
Some business owners decide to hire a marketing consultant to do a marketing strategy for them. If you decide to go this route, make sure that they take the time to truly understand your business and your model and that they have some industry experience and previous results behind them. After they are done with the strategy, go through it with a fine tooth comb to make sure that it is viable not only for now but for when the new business owner steps in.
4. Take A Look At Similar Businesses That Have Sold To Get An Idea On Price
Evaluating the price of the business is not an easy thing to do. You have to factor in the assets and the stock, the employees and their experience, goodwill and lots more. The best approach to finding out how much to sell your business for is to look at businesses like yours that have been sold and how much they sold for.
You can contact the business owners and ask them what they took into account when they were deciding on the price. Find out whether they were happy with the price that they sold at. Comparing your business to theirs will give you a fair idea of what you should ask for.
5. Prepare A Detailed Overview Of Your Business For Your Listing
What would make someone want to buy your business from you? This is the question that the detailed overview should answer. Describe all the things in your business that are attractive to people looking to buy a business. Include things like location, the uniqueness of your product, the level of skill in your employees, the fact that you have prepared all the documentation the new owner will need to move forward, equipment if you have it and so on.
Refine your overview so that it reads well and is professional. If you have a business big enough to have different departments, you should ask the department managers write about their departments because they know them best. Go through each overview carefully to make sure that everything is accurate.
6. Take Images Of Your Business To Paint The Picture For Potential Buyers
Pictures help potential buyers to build an image in their minds. With a good camera, go around the business and take images of all the things that you detailed in your overview. If you have a factory, take pictures of it at work and also when it isn’t at work. Take pictures of employees as work and as a group.
Don’t forget that the surroundings your business sits in are very important so get out there and take the best pictures of the area around you. Don’t take wide angle pictures – they don’t show proper detail. Take close ups that show entire areas. Use a camera that gives pictures that are less than 2MB so that they are easy to upload during listing.
7. List Your Business On Business Sales Websites & For Sale By Owner Sites
The next step is to get your business online. You can do this by listing on business sales websites or by using For Sale By Owner websites. These attract the highest traffic of people looking to buy businesses. One great advantage that they offer is that they don’t ask you for commissions after the sale the way an agent does. They ask for a small upfront fee, much smaller than you would pay an agent. Listing is easy; just go to the site, select the package that you are willing to pay for, enter your contact details, pay and list the business.
After you list your business you will start to get enquiries. Arrange to do inspections as soon as possible. Show all aspects of the business and then sit down with the prospect to review all the documentation that you have prepared for him. Make sure to be as thorough as possible and let them understand that although you are selling the business, you will be available should they have any questions.
8. Narrow Down Interested Parties & Negotiate A Fair Sale Price
You will eventually narrow down to the people you feel are offering you good prices. Find the one that you like the best, negotiate for the price that you had settled on and if you are happy seal the deal. Remember, a business is a very personal thing so you should feel confident that the new buyer will not run it into the ground; most people who sell businesses that then fail say that they felt let down on something that they created.
Don’t just judge on price; look for the necessary experience to keep the business growing. Get a lawyer in to do all the contracts and to make sure that you are legally alright. Agree on when the deposit will be made and schedule the rest of the payments.
Now you know how to sell your business. Remember, selling a business doesn’t happen in a few short days. You need time to go through all the steps on this list and to make sure that you have done everything properly. You also need time to find a buyer so give yourself a few months at least.
About the author:
Lucas Raby is the General Manager of a company called For Sale For Lease, an online listing service that helps private landlords, private home sellers and business owners to list their properties and businesses on Australia’s largest Real Estate and Business portals to help them to sell privately, rather than using an agent or business broker.