Selling a Small Business in the Current Economy

In the current economic situation, selling a small business will not be as easy as it was in previous years.  The economy has collapsed, buyers are hesitant, and lending has tightened up. With this much insecurity in the market, for many it will be challenging to sell a business in the years to come. However, there are steps you can take to help maximize the selling potential of your business regardless of the economy.

Construct a business plan: Having a good business plan is essential for any business, but is particularly crucial at a time when the market is plagued with uncertainty. Creating a business plan that clearly indentifies current marketing strategies and future projections will greatly enhance the selling potential of your small business. Be sure to include sales strategies that are proven to be currently successful.

Re-evaluate current contracts: Renegotiating your lease agreement, and deals with vendors and employees can help to evenly disperse the financial burden in tougher times. Instead of allowing the business to bear the full force of the economic downturn, bargaining with your accounts payable will gradually reduce your expenses and increase your bottom line.

Implement creative marketing strategies: Thinking ‘outside the box’ with new marketing ideas can boost sales and introduce your business into new markets. Forming partnerships can create great sustainable value and therefore increase the net worth of your business. Ensure your business utilizes social networking outlets, as all businesses can benefit from the increased exposure and resources they can provide.

Provide Financing: With funding increasingly difficult to obtain, a business that is seller financed is all the more attractive to potential buyers. A seller who does not wish to finance is at a disadvantage and may not be able to achieve their asking price. Your willingness to finance the sale affords you substantial bargaining power. It will often result in a higher end price, plus you will be paid interest until the loan is paid off.

Although selling a small business in the current economic conditions can be a daunting task, following and implementing these steps can be beneficial and expedite the sale of your business.  

Selling A Distressed Business

Surprisingly, selling a distressed business can be profitable and relatively straight-forward. There are individual buyers and firms that specialize in purchasing such businesses; these buyers tend to be opportunistic bargain hunters and are adept at getting more for their money. Therefore, there are some strategies that you should utilize in order to maximize profit from the sale of your distressed business.

First of all, you may want to enlist the help of a business broker who specializes in distressed sales as they may be able to sell your business quicker, more effectively and help broker a better deal for you. Whether you decide to use a broker or sell your business independently, it is imperative that you prepare your financial statements and identify potential buyers.

You must develop a realistic understanding of the value of your business, in order to sell it in the most profitable format – either as a whole, piecemeal or by liquidating part of it. Search for ways to reduce risk to the buyer, and emphasize the value of the business’s assets. Never underestimate the value of your customer base, as this is often the most significant asset of a business. Also focus on the worth of your inventory, intellectual property and FF&E. Review the areas of the business that require improvement and perform a cost–benefit analysis. If fixing an area of concern leads to a rapid raise in value that outweighs the cost of repair, you should certainly do it.

Finally, have a strategic plan in place in regards to the actual sale of your distressed business. It is often advisable to have a ‘time is money’ approach to the sale, as time spent waiting for a higher offer can ultimately lose you money. Nevertheless, always first examine the benefits and risks of taking a quick, lower offer over waiting to reach your anticipated selling price. You should also have a back-up plan in the event that your business does not sell – continue to manage the business, liquidate or declare bankruptcy.

Tips for Selling a Resale Franchise

At some point and time, all franchise owners will go through the process of selling their franchise. This can be a frustrating process, if you are unprepared and uninformed. Fortunately, the stress of this task can be greatly reduced by following a few simple guidelines.

Know the franchisor’s rules regarding resale

It’s important to keep your franchisor informed about your plans to sell the franchise from the beginning. Many franchisors have rules pertaining to the sale of a franchise, and criteria that the buyer must meet. Most franchisors will offer assistance in selling your franchise, and may also be aware of potential buyers interested in a specific territory.

Prepare for the sale

Be aware that some franchise sales require more detailed preparation than others. Ask your franchisor for specific advice about what you may need to do for the sale of your franchise. This may involve putting financial records in order, establishing the value of the franchise, setting a price, and notifying employees if necessary.

Understand the market, and the potential buyer

Having a basic understanding of the market before listing your franchise for sale is imperative. Use similar franchises that have sold recently for a baseline to determine what your franchise is worth.  Establish if the local economy is suitable for a quick sale, and verify if there are potential buyers in the area. Check with your franchisor about any specific qualifications that a buyer must meet (total capital investment, liquid capital requirement). To save time, know the type of buyer that you are looking for so that those with insufficient qualifications can be disregarded.

Market the franchise

There are many options for advertising your franchise for sale. Organize exposure for your franchise in the form of networking with people in the industry, and online and print advertising.  You may also choose to involve a business broker in the sale of your franchise. When it comes to a sales pitch, ensure you know the demographics of your market, answers to potential questions, and all about the franchise system for sale.

Provide assistance to the buyer

Ultimately, you might need to provide assistance to the buyer of your franchise. Help them complete their application with the franchisor. Include training or even working alongside the buyer for the first few months.