Author, Insider 94 Staff
It takes a village to grow a small business. Years of hard work, networking, sales, success, downturns, reinventing, hiring, firing, ups, downs, and everything in between can all lead to one ultimate question; is it time to sell? Fortunately, we have compiled the top tips from professional experts, that successfully do this for a living, to help you make that decision and navigate the complex process of selling your business. Whether you are contemplating a sale, simply planning for the future, or are ready to jump in tomorrow, these 10 tips for selling your business will provide you the knowledge, guidance, and resources you need for a successful sale.
1 Be Prepared: One of two eventualities will happen in business; it will either change hands or it will close. Even if you aren’t thinking about selling your small business, there may come a time or be a situation that facilitates you to do it. Having a plan is smart. Having the team you need in place to enact that plan is even smarter. The time is now to line up your resources and have some ducks in a row, so all your hard work doesn’t go to waste in a “life happens” moment. A crucial first step is having a management plan in case something happens to you.
2 Assess and Increase Value: Do you know the current market value of your business? Probably not. It takes professional analysis and expertise to thoroughly determine business market value and help you get the top dollar from your business sale. Consulting with a firm that does Quality of Earnings reporting to improve operational efficiencies, which ultimately lead to increasing value, is incredibly beneficial (why not increase value before selling?). According to Tim Van Mieghem of The ProAction Group, “the importance of a Quality of Earnings (QoE) report cannot be overstated. They are ubiquitous. The report is a key tool in understanding the health of a business, but it is not the only tool. Beyond the clarity a QoE delivers on the buy-side, it can also provide sellers with a third-party’s view of potential areas for concern – areas that can be targeted to maximize the company’s future market value.” Working with a resource extension group is a unique way to determine market value and increase it prior to selling. This process provides sellers support and objective assessments that identify and quantify the impact of implementing operational improvements, which will provide exponential value in the selling process.
3 Find the Right Attorney: Selling a business is complex. It is3 imperative to have the right professionals representing your best interest, and the finding the right attorney tops that list. You will need a specialized transaction attorney with experience and a proven track record in the strategies of selling a business, and it may not be your current attorney. Do not settle for an attorney without business sales experience (with a practice focuses on it). Lack of experience can be costly and result in a less than desirable sale.
4 Find the Right Broker: Advisors make a huge difference when selling a business and having the right Broker will ultimately pay for itself, ensuring you get the most for the value of your business. Start interviewing properly licensed brokers, who are active in your local market, at least 12 months prior to selling. Be sure to ask them about their track records, their network of potential buyers (top brokers will have access to buyers across the globe), and their opinion on your business’ value.
5 Find the Right CPA: You will need a CPA that has expertise in tax matters related to a business sale and Purchase Price Allocation, and it might not be your current accountant. Your Broker will likely have an appropriate CPA referral.
6 Prepare Your Financials: Up-to-date financials are necessary for selling a business. Preparing to sell means you need to maximize your profits, and minimize expenses, to increase the value of your business (especially to buyer lenders). Work with your Accountant to clean up your books and prepare for the sale of your business.
7 Audit Inventory and Assets: Old inventory can negatively impact the sale of your business. Audit and sell/get rid of obsolete or excess inventory and unused, outdated, or broken equipment. Everything in your business should be a necessity and in working order for the businesses’ sale.
8 Audit Your Clientele: While having a large client account is wonderful, It could negatively affect the value of your business. Customer concentration is like having all your eggs in one basket, it is best to diversify and avoid having any singular client that accounts for more than 15% of sales.
9 Audit Your Contracts: Make sure any contracts you have with suppliers, customers, or service providers are up to date, in writing and transferable (if not, add this to it). Expired contracts can negatively impact your businesses’ value and even prevent a sale.
10 Consult a CFO Services Firm: A CFO services firm provides financial leaders on a fractional, interim or project basis to guide small and medium-sized businesses through complex financial issues and situations. Many firms have CFOs that specialize in selling a business, with proven results that make the expense pay for itself in the long run. An experienced CFO can lead the sale of a business in a unique way, executing all financials and overseeing the entire process with an expert team of all the necessary advisors already in place. Having an Interim CFO means the owner has a singular resource to coordinate all aspects of the sale and ultimately reap the rewards of that investment.
