Even successful business owners decide to sell their companies. The success of a business, or lack thereof, is not the only factor that leads some entrepreneurs to make the sale. You could be ready to retire or you’ve grown tired of the financial risks involved in owning your company. Regardless of your reasons, choosing to sell your business can be a difficult thing to undertake. However, the following steps will ensure that you get the best price possible for your business.
Buyers do not want to pay more, nor do seller want to receive less, than the price of a comparable business. When most people think of the value of something they will oftentimes see only the obvious. At first thought, it would seem that “assets versus debts” would be a large factor when determining the value of a business. This could not be further from the truth because there are other things that should be considered.
Business valuation is used to estimate the economic value of a company in order to determine the price that all of the involved parties are willing to pay or receive when one is selling a business. One factor is the fair market value as determined by a willing buyer and seller. Not only that, both the buyer and seller should have full knowledge of all the relevant facts with no forced coercion.
Obtaining and being able to supply potential buyers with complete information about your business presents your company professionally while also drawing the most appropriate of possible buyers.
One strategy is referred to as the Income Approach in which the value of the business is based on expected benefit and risk levels. Another, the Asset Based Approach is an asset-based analysis of a business. This will determine if a company is equal to the sum of its parts. Finally, the Market Approach is similar to the “comparable sales” method used in real estate appraisals which assume that both the buyer and seller are well-informed and acting in their own interests.
Without proper advertising experience and connections to appropriate outlets, selling a business can be a long and expensive process. As most business brokers deal in the sales of small companies, your business may not have the budget for Super Bowl ads to match the likes of larger companies.
According to Forbes, the best place for small businesses to advertise is to their current customers in the places where buyers are likely searching for businesses to purchase. Business brokers know their local advertising market and will utilize the outlets that have brought them and their clients the most success in past transactions.
You want to attract buyers with a true interest in owning and operating your type of establishment. The above information gathering and advertising strategies used by your broker will ensure that you do not waste time on inappropriate inquiries.
Several things affect the validity of a potential buyer’s interest in purchasing your company. Experts agree that anyone with a true interest in purchasing your business should be willing to express their offer in writing. Also, potential buyers should be experienced in running your type of business. You should even be sure that the new owners have considered the physical location and time commitments associated with your company.
In addition to ensuring the seriousness of inquiring buyers, there are several things you must verify their ability to follow through on the purchase. That way you can spend your time negotiating with only those prospective buyers that are capable of completing the purchase of your business.
For example, financial records can alert you to a buyer’s ability to pay the negotiated prices. For this reason, many brokers will require those making offers to pay a deposit on the purchase price. Additionally, potential buyers must have the ability to obtain necessary permits, such as liquor licenses and assume any existing property leases. One last thing, if you choose, is to find someone that is willing to work with you in regards to employee retainment following the sale.
In conclusion, you do not have to sacrifice price for the quick sale of your company. By following the steps listed above you are more likely to have a lower-stress experience when selling your business.