Selling your business is a big decision and requires a lot of thought and planning. How mentally and financially ready are you to sell your business?
– When are you seriously thinking about selling? Do you want to sell your business immediately? Or are you thinking about five years from now? 10 years? The more time that’s available before you sell, the higher the probability of receiving a higher price and securing a transaction that actually works out.
– Many businesses aren’t ready for sale, and need to prepare themselves by increasing value and perfecting the many elements such as sales, products/services, facilities, equipment, personnel, brand and documentation.
– Are you ready to work with a team of professionals whose only focus is to position your business favorably in the market? If your business isn’t freshened, doesn’t have curb appeal, and doesn’t stand up to internal scrutiny, it will never sell.
– Are you in a financial position to sell? If you need $500,000 on the sale of your business, but the valuation determines a lesser price, you may be unable to sell and will have to stay with your company for several or many more years.
All these topics require self-reflection and a discussion with your financial planner to come to a conclusion about your state of readiness for making a very big change in your life and financial prosperity.
Timetable: So, how ready are you to start the process? Your financial planner will advise on your readiness; if you have ‘homework’ to do, your advisor will guide you on the tasks that lie before you, and can develop a working timeline with key objectives for you. If, however, it is determined that your business is well-prepared to meet the vigorous and exciting period of change and transaction, then you should be prepared for an experience that could take only a few months at its most optimistic, but more likely a year or two before the sale is finalized. Your goal is to reach the culmination of the sale as fast as possible, with due care and deliberation, because the longer the sale takes, the more your potential buyer’s enthusiasm dwindles.
Price: Determine your asking price… or better yet, work with your advisor on determining your business’s value because this is what the buyer is purchasing. If your business is being sold through the auction process, your business’s price or value may not even be provided to the potential buyers, requiring the bidders to state the price they are willing to pay for your business’s perceived value in a letter of intent.
Your advisor will conduct a valuation to provide a clear idea of what your business is worth when you enter the market. Be aware that the value of your business will likely fluctuate as time goes by because of influences in the market, or because of your potential buyer’s increasingly insightful understanding. Buyers typically negotiate downward, so circumstances do not favor your business selling at the asking price you advertise. You’ll have to take this into account when you post your price, without setting your price so high that prospects remain aloof and disinterested.