Thinking about whether you are ready to exit and sell your business is an important question. Here are 3 key questions to ask yourself sooner rather than later.
Thinking about selling your business is something you don’t want to wait until the 11th hour do. It is important to be proactive and not reactive. Exiting and selling a business is a very complex and time-consuming process. There are a lot of moving pieces in selling a business and you don’t want to wait until the last minute. You’ll need to begin the process sooner by asking yourself some key questions.
What is the Value of Your Business?
First, you’ll need to determine the actual value of your business. It is a harsh truth, but what you think your business is worth and what the marketplace feels your business is worth may be two very different things. Your business is ultimately worth what a willing and able buyer is willing to pay for it given all the facts about the business.
This point serves to underscore the importance of working with a business broker early in the process. An experienced broker knows how to go about determining a price that can be substantiated and that will generate interest. Remember that at the end of the day, it will be the marketplace that determines the value of your business, but working with a seasoned professional is an excellent way to match your offering price with what the market will ultimately bear.
Are you Emotionally Ready to Sell Your Business?
Secondly, you’ll want to consider whether or not you truly want to sell. It is not uncommon for business owners to begin the process of selling their business only to realize a few hard facts. Wanting to sell and the time being right to sell are often two different things.
Upon placing your business on the market for sale, you may learn that you’re not emotionally or financially ready. If this happens to you, consider it a learning experience that will serve you well down the line.
Are Your Ducks in a Row?
If you have done a financial assessment, a little soul searching and have begun working with a business broker to determine that now is a good time to sell your business, then there are several steps you’ll need to take. You can be sure that any serious prospective buyer will want a good deal of information regarding your company including a financial analysis with “add-backs” showing the cash flow and how the value was determined. At the top of the list of items potential buyers will want to see are three–five years of profit and loss statements as well as federal income tax returns for the business. Other important documents ranging from lease and lease related documents, lists of loans against the business, payroll records, bank statements, insurance documents, etc. are all additional documents you will need to provide. You should also have a detailed list of furniture, fixtures and equipment (FF&E), copies of equipment leases, lists of employees by position, and an approximate amount of inventory on hand. A failure to not have this information organized and ready to present at a moment’s notice could be a costly mistake and jeopardize the momentum of a buyer’s interest. Buyer’s may interpret this as the seller not being motivated to sell and move on to other businesses for sale. It is important to understand that if a buyer is not satisfied or comfortable with the documentation or “transferable value” of the business, they will not move forward and take the risk of purchasing your business. Working with professionals, such as accountants, lawyers, and business broker is a savvy move. Owning and operating a business can be a complex process, and the same holds true for selling a business. Investing the time to seek out experienced and professional advice is the first step in successfully selling your business.