The Process of Selling a Business
Thinking of selling your business? This can be a big decision, whether you’re a small business owner or the CEO of a major corporation. Selling the business essentially means putting the fruits of your hard work in the hands of someone else, and that’s a scary thought in itself. Not to mention, if you don’t value your business correctly, you can wind up getting shorted during the sale process, and can lose your business to a much lower price than what it’s worth. The process of selling a business is uncloaked in this article, where we’ll discuss how it should be done, how valuing your business plays an important role, and why you should be careful who you sell to. Keep reading to learn more about selling a business!
Determining Your Value
The first (and arguably the most important) step to selling your business is determining its overall value. When you hear the word value, you’re probably thinking it’s all about money and sales. While these things certainly are taken into account, the business of your business is calculated by much more than just how much money you’re bringing in.
Let’s start with the most obvious factor: your net profitability. Once you’ve determined how much money you’re bringing in, it’s time to subtract all of your taxes, expenses, and any other factors that take away from your profits. Net profit is whatever is left after every expense is accounted for. For small businesses, this will likely include the owner’s salary and benefits, as well as vehicle expenses and maintenance.
Once you’ve determined your net profits, you can move on to valuing your assets. There are two kinds of assets that you’ll need to consider when valuing your business: tangible and intangible assets. While each is important to the business, they’re a bit different from each other.
Tangible or Intangible Assets?
Tangible and intangible assets are quite simple to tell apart. Tangible applies to things like equipment, real estate/property, or inventory; things you can physically touch. Intangible assets are things you can’t touch, but that you still have a right to and are part of the worth of the business. Any copyrights, patents, intellectual property rights, your customer base, brand identity, and more are consider intangible but still incredibly valuable.
Both of these types of assets should be included in a detailed report for any potential buyers. The buyer will want to know what kinds of assets they’re inheriting along with any profitability of the business. Both are equally important to a buyer, so you should take the time to properly analyze each for maximum accuracy.
Listing the Business
Once you’ve determined your business’s value, it’s time to list it in the right place to reach potential buyers. There are dozens of business buy and sell websites available, so choosing the right one can take a bit of research. One of the mistakes to avoid when selling a business is not listing it online or listing it in the wrong place. The wrong website can be just as detrimental to your sales efforts as not using the web at all.
The days of listing in newspapers or local ads only are over, and you’re likely to reach approximately no one this way. In fact, newspaper circulation is dropping every year, with the web taking over as the primary means of gathering information or searching for items for sale. This applies to selling a business as well; you need to list online.
Deciding to Use a Broker Service
If you’re having trouble valuing your business or you’re not sure where to list it, you may benefit from hiring a broker to help with the sale. A business broker will help you reach potential buyers that you otherwise wouldn’t have known about, and can help you determine the proper asking price based on your industry’s current status and overall value fo your business.
Just as most people use a real estate agent to list their home, many businesses choose to use the services of a business broker such as ExitAdviser to make the sales process that much simpler. The broker will know where to list your business for the best chance at making the sale and can help you all the way through the negotiation process.
Making the Sale
Don’t be afraid to negotiate with your buyer during the purchase process. You’ll likely get offers that are under your asking price, and while this is common in a sales transaction, you also don’t want to accept offers that are too low; otherwise, you’re losing your business to someone who doesn’t appreciate its full value, and you can feel cheated once the sale is complete. Stay firm in your lowest price, but don’t be overly stubborn either.
Many business owners take an administrative role in the business once it’s sold, or else still remain involved in the business’s affairs. Whether you decide to do so or not, be sure you’re selling to someone you’re sure can uphold the values and vision of the company as it moves forward.