There are dozens of factors to consider when starting your planning for what your sale might look like, including what involvement you plan on having (or not having) after the sale is finalized, how to break the news to customers and business partners, and so much more. In order to help you create a clearer picture of what steps to take before finalizing the sale of your business, we’ve put together a list of tips to help.
How To Transition a Smooth Business Sale Journey
1. Get Your Financial Documents in Order
The first and possibly most important step when planning on selling your business is getting all of your financial documentation in order. Not only will this help you understand where you currently stand financially, but it will give you a strong point to negotiate from when discussing a possible sale.
Any serious potential buyer will want to take a close look at the numbers behind their intended purchase. Being able to provide a complete picture when needed can go a long way towards establishing a good working relationship leading up to the sale.
In addition to concrete numbers, take note of other potential value your business has, including:
- Intellectual property
- What makes it unique in its space
- A roadmap showing how you achieved your success
- And more
2. Get a Business Valuation
Ensuring your documentation is in order is just as important as hiring a business appraiser to provide an objective valuation of your company. Working with a trained professional on this step can help give you insight that you may not otherwise have access to, including detailed documentation on how their estimate was reached and what factors played heaviest into that valuation.
A business appraiser might ask questions like:
- Can you provide the company’s financial statements for the past three to five years (income statement, balance sheet, and cash flow)?
- What are the company’s gross profit margins, operating margins, and net profit margins?
- Are there any non-recurring income or expenses that could distort the financial performance?
- Are there any significant liabilities, such as long-term debt or pending legal claims?
- What is the company’s working capital position (for example: current ratio, quick ratio)?
This information can give you a good starting place for an asking price, as well as give you a strong negotiating tool when entering discussions with interested parties.
3. Hire a Trusted Broker
Just as you are an expert in your field, brokers are experts in theirs. Navigating the sale of a business is rarely as simple as picking up a pen and signing your name on the dotted line. Even the most seemingly simple of transactions are likely to have some critical points pop up.
Depending on your situation, you may also need to keep your efforts focused on actually running your business (rather than devoting precious time towards preparing for and executing a sale). An experienced broker can take on those responsibilities, tackling the bulk of the work that needs to be done ahead of time before more input is needed.
With clear communication and guidance, you can leave that responsibility in trusted hands and weigh in as needed. However, leaving this part of the process to someone else may not be your goal. If you’re looking to be a more hands-on part of the sale, then a qualified broker can serve as a font of knowledge and an expert guide to ensure you haven’t missed a step or are overlooking a key process.
No matter what, if you are looking to sell your business in Dallas, TX, or any other major region, working with a broker can help you avoid any potential pitfalls and sell your business for what it deserves.
4. Find a Qualified Buyer
While this may seem self-explanatory, finding the right buyer can be a process. Just as you’ve put in the work to create a comprehensive and thorough sales package, a potential buyer needs to be able to back up their intent. Knowing what to look for and what questions to ask can help expedite the process and weed out both unqualified parties and people acting in bad faith.
Some key information to secure include concrete funding for the sale (whether pre-approved or on-hand), their experience working in the industry your business operates in, and their intentions once they take over your business.
Wrapping Up: The Next Stage
Selling your business can be both an exciting and daunting task. Whether this is the first business you’ve built and are looking to take the next step to something bigger or if you’re looking to capitalize on your retirement plans, it requires careful consideration and action to set the stage for a smooth and profitable transition.
