SELLING YOUR BUSINESS
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Assess The Value
The value of your business will depend on your industry, location and the state of the market. However, there are some basic questions that all businesses should ask. What are your sales? What is your revenue? How much of that is profit? How stable is the growth? How efficient are the systems you have in place? What (or who) does your business rely on? How are you doing relative to your competition? What will the market look like in the immediate future? What are the risks involved? Answering these questions is essential in evaluating your business and will impact the amount you can sell it for. Depending on the size and age of your business, you can expect to sell for between one and four times your annual net profit. But you want more than that.
Time It Well
Depending on the circumstances leading to the sale, you may have the luxury of being able to time it correctly. If you do, sell your business at a time when its profitability has been on a steady incline for a while. If profits have begun to dip, potential buyers will be suspicious. A business that looks like it is still growing will be a much more attractive investment. It is tempting to hold on for a little while longer to reap the rewards of that huge contract you just closed. Don’t. Sell when the perceived value of your business is at its highest. If you have just secured a great client or received some good press coverage, now is the time to sell.
Diversify Your Income
Every business specializes in something. If that one thing fails, however, trouble is on the horizon. Having only one income stream is a risk, and that risk will lower the value of your business. Regardless of how much market analysis you have conducted prior to deciding to sell your business, you cannot predict the future. If you diversify your income streams, you are in a much better position to sell at a high price. If one income stream dries out, it will not spell the end of the business.
Diversify Your Resources
What resources does your business rely on to succeed? If the answer is one, and that resource is you, then you cannot sell. After all, the business will (most likely) not come with you as an employee. The same goes for the rest of your staff. If all your sales come from one or two employees, that is a problem. What if they leave the business? If you, on the other hand, are able to ensure that your business is supported by multiple pillars, then you can sell for a higher price.
Optimize Your Systems
Running your business most efficiently should always be on your mind. This is no different when you are trying to sell. Is there a faster way to get things done? Implement it. Update software. Optimize HR procedures. Tie up any loose ends. This is of course not the time to make a major investment, but optimize where you can. Make sure everything runs like a well-oiled machine and potential buyers will be happy to throw extra money at you.
Eliminate The Fluff
Do you have any extra inventory that isn't going to be sold for a while? Maybe you have been saving it for a rainy day, thinking that you will eventually manage to sell it. Now is the time to get rid of it. If you don’t, it will be any prospective buyers’ problem. They will have many other things on their mind when taking over your business and don’t need the extra hassle. If you have any nonpayers you have been chasing for a long time, get rid of them. Make them a final offer that is difficult to refuse.
Clean Up Your Books
Anyone interested in buying your business will be interested in the financial records. Make sure they are organized and tidy. Your taxes should be sorted out and your credit history should look good. If you have any loans or debts, make sure to pay off as many of them as possible. If you are working with a nonstandard bookkeeping system, make sure you standardize it. Anyone taking over will not want to spend time deciphering any odd financial records. Well-organized records will increase the value of your business.
Imagine you want to keep growing your business. What is your plan for the future? In which direction do you see your business heading? Are you preparing for any changes in the market? Are you planning to launch a new product or offer a new service? How are you going to execute that plan? How much will your profits increase as a result? These are questions potential buyers will want answers to. Demonstrate a solid plan for growth that they can follow.
Getting the most for your business
Helping Businesses Blossom
Ingenuity, Inc. solves each client’s issues by providing a comprehensive approach backed by our team of experienced professionals. Our process fosters collaboration and innovation to ensure we not only understand the core needs of clients, but also help them develop successfully.
You have been building to sell your business that you’ve put a lot of time, effort, and equity into growing, and now you’re looking to sell. Your objective is to get maximum value when selling and you’re assessing steps to prepare for the sale. You are trying to get the maximum price for selling your business, getting the best terms and finding the right buyer