Preparing a Small Business for Sale

Adequately preparing your small business for sale is crucial – for both ease of sale and maximum profitability. A prospective buyer will naturally be wary of taking on the huge financial and personal responsibility that comes with the purchase of a business, so you must ensure that your business is unproblematic to turn over into new hands. By adhering to the following steps, you can make the preparation for the sale as efficient and effective as possible.

One of the most vital steps is to allow ample time to prepare for the sale – a year is preferable.  This gives you time to tie up all loose ends, and get your financial statements and other paperwork in order. A potential buyer will want to thoroughly inspect all of your financial records and projections, so you must ensure that these are comprehensive and up to date.  Document all business agreements and relationships, such as those with suppliers and local government departments - unwritten or ‘handshake’ agreements are not guaranteed to survive the sale. Also attempt to settle any outstanding debts, whether they belong to the business or customers with unpaid accounts. Any leases on real estate and equipment should also be renegotiated or renewed.

Creating a complete inventory of all stock and physically cleaning up your business are also key steps in preparation. Having a full record of all stock not only looks appealing in your financial records, but will also benefit the new owner of the business. If your business has a physical location, take a moment to look around your premises through the eyes of a potential buyer. Eliminate any unnecessary clutter, repaint where required, and make certain that everything is in a state of good repair and cleanliness.

Ensure that your current employees’ interests are met, so that good employees are retained through the sale process. Loyal and effective employees are essential to a business, and prospective buyers will be positively influenced if they know employees will stay with the business. Experienced employees will help to make the ownership change a smoother transition, and therefore make your business more attractive to buyers.

Finally, do not be afraid to seek the help of an experienced business broker at any time during the preparation and sale process. Such an individual can greatly aid the final sale, and also assist you with many aspects of the sale preparation. By following these steps and allowing yourself sufficient time, preparing your small business for sale can be a straightforward and ultimately profitable endeavor.

Advantages of Using a Broker to Sell Your Small Business

Although selling a business on your own (FSBO) may be an enticing idea, there are several reasons why it is advisable to enlist the help of a broker to sell you small business. Despite the temptation to save on commissions and fees, ultimately a business broker can significantly accelerate and remove hassle from the selling process.

By paying a broker commission, you are essentially providing incentive for the broker to get the best possible price for the sale of your small business. If you were to choose to do a FSBO, the sale price will often be lower than what a broker could have negotiated, therefore offsetting some of the commission cost. A broker will also have a clear understanding of the market and the value of your business, which again will help you to achieve a better sale price.

Business brokers are skilled at showcasing your business and highlighting its best attributes, therefore attracting buyers. Brokers also maintain an extensive database of buyers and contacts, which greatly aids the search for the right buyer. A good broker will also screen potential buyers in order to ascertain whether they are genuinely interested and qualified or simply wasting your time.  Once buyers are interested, a broker will often generate competition between the buyers in order to accelerate the sale and attain a better price. All of these services speed up the selling process considerably, and eliminate many headaches that you could otherwise be burdened with.

It is extremely important that your employees, competitors and vendors are unaware of the impending sale, although this can be difficult to conceal if you do a FSBO. However, a broker acts as the intermediary in such situations, and therefore enables you to keep the sale confidential. This mediator role also comes into play with regard to buyer/seller relations, as all negotiations pass through and are interpreted by the broker.

Lastly, a broker is highly valuable when it comes to finalizing the sale, as they understand all the nuances and legal requirements that the average seller may not be aware of. A good broker plays a key role in the entire buy/sell process, and is well worth the price.

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.