5 Expert Tips to Know Before Selling Your Business

The process of selling a business can be very intricate. A successful sale requires being in tune with what buyers are looking for and addressing any potential risk factors. Consulting with a professional business broker can help shed light on what your business needs to work on. By getting an accurate valuation, can help you discover the company’s strengths and weaknesses. Here are a few of the most important tips that many business owners are not aware of when preparing to sell their businesses.

No one wants to buy a business where they have to work long hours

Running a business requires a lot of dedication and many sacrifices. You undoubtably had to work hard to build your company up to where it is today. However, if operating the business requires long hours for meager pay, nobody will be interested in buying it. Buyers are typically not looking for a full-time job when trying to invest in a business. For the ones who are okay with working long hours, at least to start, the salary has to be worth it. Having to continuously invest long hours in running the business can hurt its value and growth potential.

Your business would be worth more if you stopped working so hard

An absentee, or even a semi-absentee owner business is more valuable than an owner-operated one. Buyers see an owner-operated business as a risk because the core knowledge belongs to the person who is exiting the company. Understanding the risks and benefits of each model of business operation will help you to realize how the value of your company can greatly benefit from taking a step back and allowing your business to run itself.

You can pre-qualify your business for an SBA loan

If your business is qualified for SBA lending, you will greatly increase the number of potential buyers who are qualified to purchase it. This gives you a big advantage in marketing the business for sale to buyers who need the financing. Going through the pre-qualification process also helps you to properly prepare your financials for the sale process. Business brokers have relationships with lenders so they can help pre-qualify businesses for SBA loans before listing them. Working with one can help you to work through the requirements and complete the process quickly.

Keeping key employees is a critical part of selling a business

Buyers are looking for a smooth transition when taking over a business. If proprietary knowledge about the company is confined to one, or a few individuals, it poses a big risk to the success of the company moving forward. As an owner, it is not only important to take a step back, but also makes sure key processes and knowledge about the business are well documented. A thorough operations manual can help transition the new owner and quickly train new staff members. If you haven’t already, begin grooming a strong management team and have an employee succession plan in place. You should also make a concerted effort to retain key employees and incentivize them to stay on after the sale.

Use a business valuation to defend your asking price

Getting an accurate business valuation not only helps you to prepare your business for sale, but also helps you to sell it. Financials play a huge role in formulating the value of your business, but there are many intangible factors that go into a valuation. A knowledgeable and experienced business broker will consider these in determining what your business is worth. While other professionals can provide you with a valuation, a business broker will be the subject matter expert on your business. Since they typically work with businesses from all industries and of all sizes, they are the most qualified to perform an accurate valuation, considering all factors. Their insight can help give you the guidance you need to boost your company’s value before the sale.

When preparing to exit your business, make sure you have an understanding of what buyers are looking for in an investment. Putting yourself in their shoes can help guide your decision-making throughout the sale process. Working with a broker will not only provide you with the expertise you need to sell your business for its maximum value, but also allow you to continue running it throughout the sale process, without dividing your time. While these tips are a valuable starting point for selling your business, having the right help can prevent you from making costly mistakes and greatly improve your odds of selling successfully.