11 Sep 5 Things to Improve the Odds of Selling a Business
Most business owners don’t realize that over 60% of businesses put up for sale never get sold. Business owners are fighting the odds when selling a business from the beginning. If owners don’t take steps to prepare the business they might not get sold. Here are 5 things owners can do that will improve the odds of a sale:
- Know the value of your business. The #1 reason for not selling a business is the valuation gap between what the owner thinks the business is worth and what the buyer wants to pay. Buyers have to believe they will be getting a good return on the money they are paying for a business. Get an independent business valuation early in the process to understand the realistic market value. If the value is lower than you want like take the time to implement changes to maximize the value. It is well worth the time to increase the business performance and fundamentals rather than putting the business on the market much higher than fundamentals suggest. Putting the business on the market for the right price will help to eliminate the biggest challenge and a waste of time when selling a business.
- Get yourself out of the business. When your business started you were the one who had to make the decisions, had the knowledge and the vision. You were the hub of the business. Now that you are selling a business, any special knowledge or key relationships you hold should be transferred to others who will be staying with the business. Having a solid team of people around you that can run the business will increase the value and attractiveness of the business.
- Have your books in order. If a buyer can look at good financial records and easily see the accounting was done properly gives them a boost of confidence in the numbers and eases their concerns over problems with the books inflating profits, etc. Buyers expect that you will be using accounting software. Buyers expect that you will be completing monthly financial statements. If you have poor financial or non existent financial records it is well worth the investment in time and money to get this set up and in place. You will sell your business for more money with good records. Good financial records will improve your chances of selling a business and allow you to manage your business better.
- Physically preparations. You may have been in your business for quite a while. Just like cars, houses, yachts, etc. You need to remove the clutter and clean from top to bottom. This is not a light dusting. This is a deep cleaning. In many cases this means bringing in professionals. Serious potential buyers will be walking through your business. A clean and organized business will sell for more and faster. Plus it makes it a better place to work.
- Show potential buyers potential and the path forward. Potential buyers want to see that they will be able to come into the business, run it successfully, and improve top/bottom line. You as the owner have the best ideas for this. When you are selling a business, you should be aggressively implementing improvements and growing the business right up to the close of the sale. Buyers don’t know that you are making improvements, launching a new product line or landing new customers. If these are in process and you communicate to potential buyers you have a much greater chance that they will understand the business potential. It will give buyers a path for the initial time they are in the business while they are figuring their path forward.
Selling a business is not a quick or easy process. Buyers are trying to find the right business at a price where they can get a good return on their investment. Being prepared and helping them see how they will get a good return will improve your chance of success.
If you want to learn more about selling a business and other important topics for business owners follow Cross Northwest on LinkedIn, like us on FaceBook, visit our web site, or email us: [email protected] for a direct response.
Damon Pistulka is a Managing Partner for Cross Northwest.
Cross Northwest is a M&A Advisory/Business Brokerage/Valuation/Management Consulting Company
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