1. Ask yourself if this is the right time to sell. If a business' current financial picture doesn't match the owner's expectations, one or the other has to be adjusted.
2. As a seller, you must know your reason(s) for selling. It is one of the first questions a buyer will ask so you will need to be prepared to articulate your reason(s). Ideally, it is much better when the reason(s) are not urgent.
3. You will need to get your books in order. Prospective buyers will want to see at least three years of Tax Returns and Profit and Loss statements.
4. As part of getting your books in order, you'll need to understand your business' true profitability or cash flow. Since most businesses claim a variety of non-operational expenses (i.e. personal auto lease, personal discretionary expenses, etc.), you must make sure that you have supporting documentation for these.
5. You must also make sure all of your legal commitments are in order. You need to review all of your permits, leases, client and vendor contracts, etc. and understand their impact on the business. For example, if your business' location is key to its performance, a long term lease would be appealing to a buyer.
6. If you are absolutely vital to the business, efforts must be made to gradually delegate key responsibilities to various staff members, especially those related to customer relationships and revenue generation.
When a buyer is coming out to see your business for the first time, it’s important to make a good first impression. Buyers look for companies that show well because it can often be indicative of an orderly run business. The first impression can turn on (or off) buyers and add (or subtract) value from your business.
The common thread weaving through all of these steps is credibility. As a seller, if you want to keep buyers moving forward, you must show your respect by being open, honest and accurate about all things, both good and bad.
3. You will need to get your books in order. Prospective buyers will want to see at least three years of Tax Returns and Profit and Loss statements.
4. As part of getting your books in order, you'll need to understand your business' true profitability or cash flow. Since most businesses claim a variety of non-operational expenses (i.e. personal auto lease, personal discretionary expenses, etc.), you must make sure that you have supporting documentation for these.
5. You must also make sure all of your legal commitments are in order. You need to review all of your permits, leases, client and vendor contracts, etc. and understand their impact on the business. For example, if your business' location is key to its performance, a long term lease would be appealing to a buyer.
6. If you are absolutely vital to the business, efforts must be made to gradually delegate key responsibilities to various staff members, especially those related to customer relationships and revenue generation.
When a buyer is coming out to see your business for the first time, it’s important to make a good first impression. Buyers look for companies that show well because it can often be indicative of an orderly run business. The first impression can turn on (or off) buyers and add (or subtract) value from your business.
The common thread weaving through all of these steps is credibility. As a seller, if you want to keep buyers moving forward, you must show your respect by being open, honest and accurate about all things, both good and bad.
And finally, sellers should use a professional business broker to enable them to keep focused on successfully running it. They can’t afford to let the business’ performance decline because they’re too focused on its sale. This will only give buyers additional negotiating power to lower their offers. Also, not only does having a third party represent their interests indicate that they are taking this venture seriously; it can often lead to a number of buyers being interested in their business.
Do you have small business questions you would like answered about this article or others? Please visit www.VRWindsor.com or call 519-903-7807.
William Sivell is a sales representative of VR Windsor Inc., Business Brokerage; his blog appears every Tuesday.
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