You, as a business owner, have been working long enough, and you are ready to sell your business. There are scores of reasons why you have made this decision, but your mind is made up and you are ready. What next? How do you sell your business for what it’s worth, and who can help you? This article will try to answer some of these questions and more.
Why You Want to Sell Your Business
One of the most common reasons a business owner sells their business is because they are simply burned out. They have been running their business so long, they become bored and tired of the monotony, stress, hard work, or a variety of other reasons. For example, if a street taco vendor has been preparing tacos for 20 years, five days a week, and in the same location, it’s not surprising that they would get tired of doing the same thing all the time.
Try Something New
In the example above with the taco stand, the owner might just want to do something else. Maybe now, they really want to start making hamburgers, or maybe they just want to get out of the street vending business altogether. Or, if business has been so good for 20 years selling tacos, it could be an opportunity to open a bigger restaurant selling more tacos to more people and making more money.
Another common reason to sell a business is that an owner is getting older and decides it’s time to retire. They have saved up enough money to live out the rest of their life comfortably, and it’s finally time to move on. Some business owners will work out a deal with a younger family member to take over the business, and some will try to sell for the highest market price possible.
Sometimes, business owners sell because they themselves have fallen ill, or a close family member has become sick and needs the owner to act as their caregiver.
The Business Is Now Obsolete
A perfect example of a business becoming obsolete is Blockbuster Video. In an age where people can rent a movie from their own couch, the thought of having to drive somewhere to find a movie has become inconceivable.
Ask any small business owner who has lost business because a Walmart has opened nearby, and you’ll quickly see how a business can become obsolete. Imagine a mom and pop grocery store that sells foods for typical grocery store prices in the neighborhood, and then a Walmart is built nearby where nearly every food item is sold more cheaply. The mom and pop store would have no choice but to close its doors or start a new business that does not compete with Walmart.
What Are Common Mistakes Made When Selling a Business?
Overvaluing the Worth of the Business
When the owner(s) of a business decides to sell their business, they optimistically expect to get top dollar for the sale. Oftentimes, the owner has a sentimental and proud view of the business with too much consideration of the time and effort that went into making the business into what it has become. This emotional attachment can cause the owner to turn down good, legitimate offers.
Not Researching the Qualifications of a Potential Buyer
Too many deals fall through because the seller has not thoroughly researched and prequalified a potential buyer. Buyers who know they have shady or borderline credit or qualifications will notoriously present themselves as credible, qualified buyers. So while a seller is wasting their time negotiating with the wrong buyer, they might ignore a good one who is qualified and thus let a potential sale slip through their fingers.
Waiting Too Long to Sell Your Business
The two examples above illustrate how the sale of the business can be dragged out. Now, buyers are wondering why this business hasn’t sold in X amount of months, causing them to view it as worth even less. Sometimes the markets change, existing clients go to competitors, the business’s employees find new jobs, or a number of other surprises might come up to devalue the worth of the business. Before you know it, the owner has to close the business and salvage what it can from inventory, equipment, land, etc. If you are trying to sell your business, don’t wait too long.
Before beginning the process of selling your business, realistically come up with a price range of what you’ll accept and be ready to get less than what you want. Anything is better than the latter scenario mentioned earlier where you have to sell the separate parts of the business instead of the business itself. Sell while your business is hot and thriving, and be ready for some healthy negotiations.
How to Sell a Business
If you are planning to sell your business, be prepared to work on getting your business ready. This might require giving the brick-and-mortar store a complete facelift, just as if you are selling your house. It would also mean cleaning your books and tax records so you can have everything ready to show your buyer an easy-to-understand and well-prepared documents. It also might mean replacing older equipment with something newer and more efficient.
Make sure you have a complete understanding of what your business is worth so you can have an asking price that will give you a fair share of what you deserve with a little wiggle room for negotiations. It’s also smart to know a little bit about the buyer to ensure they are qualified and not wasting your time.
Know the Value of Your Business
This is the most important part of selling your business because you want to get every penny you can from a buyer. Also, knowing the worth of your business will keep you from asking too high of a price and scaring potential buyers away.
Professional Valuation – Someone who determines the value of a business could obtain a professional valuation of the business with certifications such as the Certified Valuation Analysts (CVA) or the Accredited Business Valuation (ABV). You would be charged a fee from a few thousand and, depending on the size and complexity of your business.
How Do I Know What My Business Is Worth?
Business Valuation Calculators – The Internet is loaded with business valuation calculators to help determine what your business is worth. Read “10 Business Valuation Calculators To Gauge Value of A Business for Sale” to find one right for your business.
Work with Your Accountant and/or Lawyer – A good place to start when evaluating your company is your accountant or lawyer. They already know your business, what you spend, what you make, and what price you hope to get for your business. Sometimes, though, these two professionals can overlook important factors related to the economy and industry that a professional valuation analyst would not.
Who Can Help You Sell Your Business?
There are several companies available to help you sell your company, such as business marketplaces like BizBuySell, LoopNet, and BizQuest. Then there are websites like BusinessforSale that offer a comprehensive series of guides that will figuratively hold your hand and help you with issues such as valuing your business, negotiations, how to prepare your business, practice due diligence, and find the right business broker for you.
There is a wealth of information to be found on the Internet that will guide you when selling your business. Do your research, take your time, and enlist the help of others if you think it would benefit your sale. You worked hard to build your business, so you want to be smart when selling.
If you are planning to sell your business and need a loan to help fix it up and make it attractive for potential buyers, visit us at Affinity Beyond Capital. Our professional lenders are there to help you find exactly the right type of loan for your business purposes. Call (833) 234-6489 today.