If you’re considering selling your business, regardless of what kind of business it is, it’s important to have your eyes wide open and understand the market and how to sell before going into it. Here are 10 things to know before you sell your business.
#1. Understand your finances.
Basically, get your house or business in order. Consider how the business would look like to a cautious buyer. Are all of your finances in one location? Are they clear and easy to read? Are there any discrepancies? Make sure everything is in order financially with your profit and loss statements and that everything adds up. Buyers will scrutinize every tiny little detail so make sure you don’t give them any ammunition to find fault with your books.
#2. Understand that a buyer will not pay for potential.
Buyers need to see exactly how the business makes money, not how the business could make money. A lot of business owners think they have a potential gold mine and set the selling price at that perceived potential, but buyers do not see any value in potential, only reality.
#3. Buyers are interested in profits.
Profits are different than revenue. Revenue might sound good but when it comes down to the profit of the business, it could be quite different. If the business makes $100,000 a year but has $90,000 in expenses, that’s not a big profit.
#4. Buyers will verify financial claims.
Going back to the first point here, if you’re going to claim revenue from a specific source make sure you have verifiable proof. You’ll need proof of invoices, income, expenses, and every penny must be accounted for.
#5. Be honest.
Buyers can see through manipulations so it’s better just to be honest so that the buyer really knows what they’re getting into and feels comfortable buying the business.
#6. Be ready to answer a lot of questions.
Selling a business means you’ll have a lot of questions to be answered so be prepared with financial answers, online or brick and mortar questions, and like I just said, be as honest as possible. Don’t judge the buyer for having a lot of questions. Many buyers may even come up with a lot of questions in an attempt to find inconsistencies and red flags.
#7. Are you emotionally ready?
Selling your business when it’s your baby can be emotional. Don’t expect it to be a cut and dry transaction. It’s okay to get a little emotionally involved but keep your emotions at bay because the buyer definitely well.
#8. Use a commercial real estate agent.
Real estate agents that specialize in selling businesses or commercial property understand all of the details that go along with this type of transaction. They can answer questions that might arise and offer advice on how to negotiate and proceed.
If you’re considering selling your business let’s talk about valuation and what you could get out of it in this market.