The act of selling your business is not something you want to do in the spur of the moment. This particular situation requires deep rational thoughts; otherwise you might have regrets later in your life. From a sheer financial standpoint, you have to make sure you get what your business really deserves and settle for nothing less, if of course your final decision is to sell. Here are 7 questions to help you figure out, consciously, if you should be selling your business.
Do I really want to sell my business?
There is one critical factor for entrepreneurial success – never give up. But in order to “use” this phrase the right way, you have to be sure that you possess a sense of the thin line between “never give up” being a good attitude and it being bad. Rationally assess the situation your business is in and only then make the final decision whether you want to sell your “creation” or not.
What is the value of my business?
Very important thing here to notice is that I said “value”, not “price”. A business valued too low will cost thousands of dollars to the owner and a business valued too high might not have any interested buyers. Again, the thin line in the middle is what we are looking for. For instance, most small businesses show either losses or very little profit on their financial statements and tax returns. However, they can still get sold for 50% to 80% more than the documents show they are worth. The valuation of your business should, preferably, be done by an independent valuation company. It will show your financial picture in its best light.
Is your business ready to be sold?
You can’t just decide one day that you want to sell and then sell your business the next week or month. It doesn’t work that way. Best case scenario, you should prepare it for sale no less than two years. Why so long? If you plan on selling your business at its actual price and not lose any potential money you might have gotten for it, the financials for the past two to three years must be spot on. Think how you can present your business at its most profitable or buyers will undervalue it.
Is your business “sinking”?
Who wants to leave the ship when it is headed for the Treasure Island, right? Everyone abandons it when it is sinking. It is the same with your business. If your business is going down and is not turning any profits, and then you decide to sell it, you are in a lot of trouble. The ideal time to sell would be when the business is at its highest state. But how do you know it is at its highest and why should you sell if it is making you money? This is where business owners and entrepreneurs differ. A business owner will stay with the business while the entrepreneur will sell and move onto new projects.
Are industry specific market conditions optimal?
Your business might not be doing well because of current market conditions for your specific industry. In such a case, it is better to wait a few quarters to see if conditions improve. After all, if a market is going down, all businesses involved in it will experience a downturn.
What could make a buyer walk away from the deal?
Make sure that you have foreseen everything before you get this thing going. Are all your contracts in tact? Can the business function without you or some of your clients? Consider everything that could potentially make a buyer lose interest.
Is everything in order?
It is always good to make a final check of everything. All contracts, agreements, financial obligations, tax notices, etc must all be in order. Only then can you meet with the buyer and discuss the acquisition face to face. The acquisition itself can take only a few days if buyer is pleased with the presented information or go up to several weeks if you didn’t answer any of the questions above.
It is of critical importance that you ask yourself these questions before starting your business’ sale process. There are many companies specializing in valuating and preparing businesses for acquisitions, so if you are not 100% sure what to do, do not hesitate to seek external help.