Coronavirus has changed a lot of things for Americans, including the way business is done. Many businesses had to shut down because they were not considered “essential.” Having to shut down may have left you without an income and now you may be thinking about selling your business. Before you decide to hang up the towel and close the doors permanently, you will likely get more money for it if you follow a procedure.
If you made a business plan when you started the business, you may have created an exit plan. Look it over and determine if you still want to follow it, or revise it to suit your current situation. Otherwise, follow these steps.
- Make the decision. If you are a sole proprietor, you do not need to consult anyone. If partners are involved, or a corporate board, it will be necessary to get their agreement first.
- Plan the sale. Avoid selling your business haphazardly just to get rid of it. You also need to realize that it will not sell overnight. In the planning stages, you need to think about what you may need to do to bring the most value. It is highly unlikely that you will just sell it and have no further involvement.
- Determine how much the business is worth and what you want from it. Small businesses can often get between 2-3 times the profit. A medium-sized business can usually get between 3-5 times the profit, and a large business can get up to 10 times the profit. Factors determining the price also include the market demand, location, the finances of the business, and industry trends. Be sure to allow some room for negotiation to take place.
- Figure out how you are willing to sell. When selling your business, decide if you want to demand cash up front, or are you willing to help finance it yourself?
- Calculate how long it will take to train the buyer and help with training the new employees. You cannot expect a buyer to know all the ins-and-outs of the business. It will take some time to train the buyer and employees before you can back away from it completely.
- Get the financials in shape. Any potential buyer will need to know exactly how well the business is doing in terms of costs and profit and will want to see the records for three years or more. They will also want to know the assets and value of them. You will need an appraiser for this.
- Increase sales. You will want to show potential buyers that your business is doing well with multiple buyers.
- Decide if you are looking for a particular type of buyer.
- Understand that the buyer may have some conditions, too.
- Demand pre-qualified buyers. You will waste a lot of time if you do not get buyers who are pre-qualified for a business loan. Otherwise, you may wait months before they can get qualified, only to have them end up unable to get a loan.
- Get the right documents for the sale in advance. You may need many documents to complete the sale, depending on what type of business it is. Remember to get everything in writing.
- Get legal and professional help when selling your business if you are not sure of what to do. If the business is larger, you may need a lawyer to draw up the correct documents and to provide you with the right advice.