When it comes to selling anything you have a personal stake in, experts will tell you that emotions can get in the way of good plans and successful executions. So how should you approach the sale of your business?
For advice that’s already proven to work, one place to turn is the business experts who have successfully put companies on the market. In their experiences, you’ll find some important strategies for effectively selling your small business.
Ask The Right Questions
Creating a plan for selling your business at some future date involves understanding the elements of timing, opportunity and best practices. These five questions will help you craft a plan that will get you what you want when you go to sell:
1. What are the triggers for selling? There’s an element of enjoyment that drives most entrepreneurs to continue to want to work at their business. When that’s gone, it could be the trigger for your sales strategy to kick in. Once burnout is a topic of consideration, selling your business is one way to remain creative and viable as an entrepreneur.
2. What is the lifecycle? A key question to answer is where your business is positioned in its lifecycle.
3. What value have you added? You’ve likely introduced new intellectual property to your small business, and you’ve almost certainly developed your sales force and client base in a way that will be valuable to the next owner. Identify opportunities to further fine-tune your company in the run-up to selling. Adding staff or resources now can make your pitch better when it’s time to strike a deal.
4. How much is enough? You want to know that you’ve reaped enough from what you’ve sown—your sales price should reflect that. Most accountants say the formula for setting the right price should be based on returns on assets, a return on funds invested, or a profitability multiplication formula. Underlying all of this is the concept of “enough.” Understand your concept of what your sufficient profit is. Knowing your number can make the difference between a successful sale and starting over again when the potential buyer balks.
5. Broker or no broker? A broker can protect you against frivolous offers. If you don’t hire a business broker to weed out real buyers from curiosity seekers, you’ll be wasting a lot of your time and energy, who has 50 years of business and business sale experience. Interview many business brokers. Some will tell you’re asking too much, and some will say you’re way too low. When you know what a fair price is, you’ll know which broker is the right one for you.
Finally, a key step in selling your business comes after the sale is made. Train and educate the new owner, especially when your deal includes a payment schedule for the buyer.
Stay with them, breaking them in, holding their hand, until you’re confident they can swim on their own both for their sake and to guarantee you’ll get all your payments.