Selling your business is a huge decision for you and potential buyers. Unfortunately, it's also a complicated and time-consuming process that can take several months or even years before you reach a final sale price with an interested buyer.
However, you can streamline the process if you know how to sell your business efficiently. And while there isn't a magic solution to the sales process, there are many steps to take and mistakes to avoid to make your life easier. Not to mention, there are online creative ways of selling businesses. Plus, you can always utilize a small business consultant to assisted you with selling a business quickly.
So follow along as we'll explain how to sell a business quickly and to the best buyer.
In summary, here are the steps you should take when selling your business:
Other than those, there are some common mistakes to avoid, such as impatience, dishonesty, not planning for the sales process, and not negotiating.
Selling your business is a very complicated process, and there's no shortcut to getting the best deal in a short period. You could hire an experienced business broker or small business consultant if you can afford the price.
But if you can't afford the broker's commission, you can prepare your business for sale by valuing it accurately and presenting its favorable records to potential buyers.
Once you attract buyers, maintain the due diligence process, screen your serious buyers and meet with them, and be ready to negotiate.
Before you start your journey, you need to set an asking price for your business. You should also set a reasonable price, which can be hard to determine if you don't know what you're doing.
So here are the best tips to determine the value of your business accurately.
Calculate the value of your business assets and sum them up. This can include real estate, equipment, vehicles, inventory, raw materials, and land. These are all tangible things with relatively straightforward values, but don't forget to subtract liabilities from the sum for an honest tally.
Although revenue can be misleading because it doesn't factor in costs, it's still essential when determining your company's value. Sometimes, a rough estimate of the selling price is about 3x the business' annual income.
It's also helpful to know how your business revenue holds up compared to the industry benchmarks. This is one of the most important factors when trying to determine how to sell a business quickly.
Another helpful measure is EBITDA, or earnings before interest, taxes, depreciation, and amortization.
EBITDA is a useful alternative to net income that measures the company's overall financial performance by factoring in costs that often don't usually make it to cash flow statements.
Performing a cash flow analysis gives you great insight into the company's current financial situation. It can also help you forecast how much money the company will make in the future, which is a robust measure for prospective buyers.
Many companies have intangible assets that cause valuation debates between buyers and sellers. But before you get to that stage, you should consider them and their value first. If your business has a strategic advantage trying to understand how to sell a business quickly will come naturally as you have a significant advantage over the others.
For example, consider about your company's geographical location. A hillside bar with a beautiful view is more valuable than an average urban one.
Brand strength and online popularity are also critical and can give your business a competitive advantage, which is another strategic advantage.
Think about what makes your company unique or rare and factor it into the overall value. And yes, we know it's hard to pin a price on these, but you can compare them to industry benchmarks or contact an experienced broker to get an idea. Even the strong team you created could be considered a unique advantage.
There are many places to list your business, and it all comes down to your situation. For example, if it's an online business, you can list it on business selling websites like BizBuySell or BusinessesForSale or even social media. There are also platforms for online businesses only like Flippa.
If it's a small business in a niche industry, you can list it in magazines or trade publications. You could also sell your small business online for a small subscription fee.
When listing the business, make sure to present it well by naming its strong points, using a sleek and attractive title, and uploading high-quality, non-revealing pictures.
Larger businesses are rarely listed on business selling websites or magazines because their sales often happen behind the curtain. And that's why networking is vital in business.
If you have a friend, family member, or acquaintance you know might be interested in buying the business, you can approach them.
You can also sell to a loyal employee or executive that you trust through an employee stock ownership plan, which comes with some tax benefits.
You'll eventually start attracting interested buyers, and dealing with many questions and offers can be draining.
Not all offers will be serious, so you should screen buyers before proceeding.
If a potential buyer asks a simple question, you can answer them over email. But once things start getting serious, you can follow up with an online or face-to-face meeting.
During the meeting, you should ask some questions to assess serious buyers. For example, ask them if they already have the capital to buy your business. Ask for information about their assets and maybe even a credit report if you're using seller financing.
You'll also want the new owner to be competent enough to run the business smoothly. After all, there are employees and customers who rely on it.
Therefore, you should ask the potential buyer if they have any experience in the industry or running a business.
Some buyers might refuse to share this information with you. In our eyes, that's a red flag but use your best judgment.
So you've determined the value of your business and found your prospective buyer, now it's time to sell your business. Ideally, you want a smooth transition of ownership, but you can't rush it too much either.
So here are the best tips when selling to interested buyers.
When you sell anything, you tidy it up to attract a potential buyer. The same goes for businesses, and you should prepare yours similarly.
Your office or building should be clean, tidy, and presentable. A weary building or messy office is a bad sign for interested buyers.
If you run an online business, make sure your website is neat, has a straightforward user interface, and doesn't have bugs.
Be ready to showcase and describe the different parts of your business to the potential buyer. A new business owner will also want to know about running the business, such as daily operations and customers.
You should also have your company's paperwork ready when the buyer asks.
External factors, such as industry demand and government policies, can affect your company's value. So it's not a great idea to sell your business after a sudden change.
Other controllable factors like profits and incoming customers indicate long-term success, which new business owners are looking for.
Ideally, you should sell your business when the market is healthy and your business is thriving.
The due diligence process is vital when buying a business between both the seller and the buyer. And your potential buyer will be looking forward to it, so you should prepare your documents and papers accordingly.
Due diligence is usually the longest step in selling a business, but you can make it faster by organizing your documents, records, and financial statements in advance.
These documents should show the buyer your business' value and repel incoming objections as much as possible.
A business broker can also help you prepare for this step and will stand by you during it to ensure everything runs smoothly.
Here are some of the documents you should prepare:
You might be exhausted during due diligence. You could get tempted into accepting the first offer you receive.
Negotiating is always tedious because you want the highest price possible, but your buyer wants the opposite. And although you may have set a reasonable price, be ready for the buyer's counter-offer.
You could also set your initial price a little high so that you're okay with a slightly lower number.
Small business owners don't need business brokers if they're selling a small business to a relative or acquaintance. But in most other cases, you'll need a business broker unless you're ready to go through extensive work.
Trying to sell your business under stress and fatigue can eventually land you a poor deal, especially since you'll still be running business operations as usual until you sell it.
We recommend you hire a business broker to take that responsibility off your shoulders.
Most brokers charge a fee of up to 10% of the sale value. So if you think you can make a successful business sale without a broker, you can skip this step.
But for most people, business brokers are a must, especially if they want to sell their business fast.
Selling a business fast doesn't always require listing it on business sale websites or other mediums. For example, if you run a blog about the company and regularly publish quality content, you can attract buyers more naturally.
And if you run an email list through your blog, you can market your business to your followers there.
You can also leverage the power of social media and online forums to market your business there. For example, showcasing your business on Facebook or even sponsoring an Instagram or TikTok influencer can spread the word quickly to millions of onlookers.
If you can find an influencer related to your business niche, you'll likely attract more interested buyers who weren't forced into seeing an ad they don't care about.
Lastly, you could also sell your business fast by networking. The people around you know you best, so marketing to trusted ones will save you a ton of hassle.
It might feel strange selling to your "career rivals" if you've been in the industry for years. But when it's time to sell, your competitors can be a tremendous resource, so don't let your emotions disrupt the deal and learn to sell your business to your competitor safely.
However, don't trust interested competitors too much, either. After all, they might be there to learn more about how you run your business for some "inspiration," so don't divulge anything crucial quickly.
You'll also definitely want them to sign a non-disclosure agreement before important talks begin because you don't want them handling sensitive information if your negotiations fall apart.
A successful sale to a competitor can be great if all the parties have good intentions. Besides, you can even ask for a contract as a consultant or similar in the new merger.
Not everyone needs a broker. So whether you can't afford a broker's fee, you're selling to a trusted person, or otherwise, here's how to sell a business without a broker.
The process is mostly the same as we described above. But instead of relying on a broker for paperwork and careful research, you'll have to do it yourself.
Prepare selling points that enhance your company's values, such as strategic advantages, sales records, and revenue streams.
When you find and screen buyers, you should prepare all your records before a meeting.
You should also hire an attorney to prepare a non-disclosure agreement (NDA) for every potential buyer to sign before you start negotiations since you will expose them to confidential information.
Once you agree, your buyer might also request you to sign a non-compete agreement.
Not knowing what you can do can land you an unfavorable deal or detract prospective buyers from considering your business. And unfortunately, it's very easy to make mistakes, especially if it's your first time selling.
But don't worry; we're here with the most common mistakes that many business owners make when selling their business. Avoid them, and the entire process should be much smoother.
We know work is tedious. You might start to slack off once you decide to sell your business. However, this is a crucial mistake because your business will suffer during that period, and it might even start losing money.
Honesty is always the best policy. Of course, it's natural to exaggerate when selling anything, but if you blow the favorable parts of your business out of proportion, you'll eventually be found during due diligence.
Depending on your business and the current supply and demand in the industry, a quick sale can happen in as little as 2-3 months and maybe even less if your company is an attractive prospect.
This depends on where your business is registered. If you decide to close and can't find buyers, it'll take several business days or weeks to finish your dissolution papers and cancel your licenses and registrations.
It could also take months to resolve pending financial obligations like debt and unpaid wages.
Start the selling process normally by preparing your company's financial records and searching your buyers. Then, when it's time to value your business, set a realistic price, but don't go too low either.
You should also consider your strategic advantages, such as geographical location or brand strength.
And if you're feeling lost, you can seek professional help from a good broker or small business consultant.
To sum it up, knowing how to sell a business quickly is key to getting a good deal without draining your energy and time too much. So make sure you plan for the sale thoroughly in advance and prepare your documents and records for the due diligence process.
We recommend most business sellers hire a business broker to do the heavy-lifting because they'll take a lot of strain off your shoulders, especially since you should continue running your business until the sale.
Screening buyers is also crucial for a business sale since you want someone with the means to buy the business but also keep running it effectively.
Ronald Osborne is an experienced business coach. With over ten years of experience, an MBA specializing in Finance, and several multimillion-dollar contracts. Ronald has been able to help large telecommunication companies, law firms, trade businesses, and everyday business owners improve their business and take it to the next level.
