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 in this article 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 procedure, 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 agent'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 investors and meet with them, and be ready to negotiate the possible transaction.
Before you start your journey, you need to set an asking price. You should also set a reasonable rate, which can be hard to determine if you don't know what you're doing.
So here are the best tips to get a valuation of your business accurately.
Calculate the value of the assets and sum them up with the help of an accountant. 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 asset. Sometimes, a rough estimate of the selling price is about 3x the annual income.
It's also helpful to know how your revenue holds up compared to the industry benchmarks. This is one of the most important factors when trying to learn the art of marketing your hard-earned establishment.
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 clients.
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 worth 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 company a competitive advantage, which is another strategic advantage.
Think about what makes your company unique or rare and factor it into the overall worth. 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 agent or dealer 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 store, you can list it on 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 promote your small business online for a minimal 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 websites or magazines because their sales often happen behind the curtain. And that's why networking is vital when you are in this industry.
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 offer it 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 inquiries 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. 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 daily workflows 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 field or running commercial activities.
Some clients 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 cost of your business and found your prospective buyer, now it's time to offer your business to others. Ideally, you want a smooth transition of ownership, but you can't rush it too much either.
So here are the best tips when marketing to interested investors.
When you market or promote anything, you tidy it up to attract a potential client. 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 investors.
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 entrepreneur will also want to know about running day to day operations, such as daily workflows and customers.
You should also have your company's paperwork ready when the client asks.
External factors, such as industry demand and government policies, can affect your company's worth. So it's not the right way to sell your establishment 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 have your business sold when the market is healthy and your business is thriving.
This process is vital when buying a business between both the seller and the investor. And your potential buyer will be looking forward to it, so you should prepare your reports and papers accordingly.
Due diligence is usually the longest phase, but you can make it faster by organizing your files, records, and financial statements in advance.
These documents should show the client your establishment's worth and repel incoming objections as much as possible.
A marketing agent or a dealer can also help you prepare for this phase and will stand by you during it to ensure everything runs smoothly.
Here are some of the important files 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 client wants the opposite. And although you may have set a reasonable rate, be ready for the client's counter-offer. Set terms and meet halfway if possible.
You could also set your initial rate a little high so that you're okay with a slightly lower number.
Small entrepreneurs don't need brokers if they're trading a micro 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. You might also need expert advisors for more insights on closing a sale.
Trying to trade your business under stress and fatigue can eventually land you a poor sale, especially since you'll still be running workflows as usual until someone finally buys it.
We recommend you hire a marketing agent and a great advisor 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 sale without an agent or a dealer, you can skip this step. But for most people, brokers are a must, especially if they want to have their business sold quickly.
Selling a business fast doesn't always require listing it on websites or other mediums. For example, if you run a blog about the company and regularly publish quality content, you can attract clients more naturally.
And if you run an email list through your blog, you can market to your followers there.
You can also leverage the power of social media and online forums to find target audience. For example, showcasing Facebook or even sponsoring an Instagram or TikTok influencer can spread the word instantly to millions of onlookers.
If you can find an influencer related to your niche, you'll likely attract more interested investors who weren't forced into seeing an ad they don't care about.
Lastly, you could also promote your business easily 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 marketing to your "career rivals" if you've been in the field for years. But when it's time, your competitors can be a tremendous resource, so don't let your emotions disrupt the deal and learn to offer 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 marketing to a trusted person, or otherwise, here's how to promote a business without a dealer.
The process is mostly the same as we described above. But instead of relying on an agent for paperwork and careful research, you'll have to do it yourself.
Prepare unique points that enhance your company's values, such as strategic advantages, sales records, and revenue streams.
When you find and screen clients, you should prepare all your records and possibble payment terms before a meeting.
You should also hire an attorney or a lawyer to prepare a non-disclosure agreement (NDA) for every potential investor to sign for compliance before you start negotiations since you will expose them to private and 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 clients from considering your establishment. 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 entrepreneurs make when marketing. 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 offer your business to other interested entrepreneurs. However, this is a crucial mistake because your day to day operations will suffer during that period, and it might even start losing money before you officially exit.
Honesty is always the best policy. Of course, it's natural to exaggerate when offering anything, but if you blow the favorable parts out of proportion, you'll eventually be found during due diligence.
Depending on your establishment and the current supply and demand in the fiels, 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 investors, it'll take several 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 process normally by preparing your company's financial records and searching your target clients. Then, when it's time to determine the cost of your business, set a realistic rate, 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 agent or small business consultant.
To sum it up, knowing how to sell a business quickly is key to getting the best deal without draining your energy and time too much. So make sure you plan for the sale thoroughly in advance and prepare your files and records for the due diligence process.
We recommend most sellers hire an agent to do the heavy-lifting because they'll take a lot of strain off your shoulders, especially since you should continue running commercial operations until the sale.
Screening potential investors is also crucial for a sale since you want someone with the means to purchase the business but also keep running it effectively.
Ronald Osborne is an Australian entrepreneur and experienced business coach. With over ten years of business and mentoring experience, an MBA specializing in Finance, along with launching/partnering with over 10 of his own companies around the globe, he has been able to achieve his version of success. 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.
