Selling Tutorial

When is a good time to sell? A good time to sell is when you’re sure it’s time for you to stop running the business. When you do sell be sure that you’re getting the best price and terms for it. After all you’ve devoted a great deal of your life to it.

Business Sellers

There are several questions which you must ask and find an answer to before you can seriously consider selling.

Question 1: What is my business worth?

There are a number of factors that go into this. What you need to remember during this process is your business is only worth what the market is willing to pay, period. Secondly, what matters even more is how much money you wind up with after taxes and other arrangements.

Question 2: Do you have reasonable expectations for selling?

If you don’t then you’ll have no luck. If you do, then you need to start assembling documentation. Here’s a checklist of items you should have together:

  • Federal Income Tax returns for the business
  • Three years’ profit and loss statements
  • List of equipment and fixtures
  • Copies of equipment leases
  • Lease and any lease-related documents
  • If applicable, a copy of the franchise agreement
  • Approximate amount of inventory on hand

Make sure everything is as up-to-date as possible and clearly laid out on paper. It is paramount to present the business well on paper. Don’t worry if certain numbers look less than ideal. What matters most is the cash flow, a business owner needs to have enough income for it to be worth their time.

Question 3: Who are you buyers?

Buyers can come from all kinds of backgrounds, learning as much as you can when engaging with a potential buyer is helpful. There are a number of different profiles for buyers and each one isn’t guaranteed to fit cleanly into one profile. There are plenty of people who mistakenly think buying a small business can get them rich quickly. These are the types which aren’t realistic potential buyers. Here are a few traits for good potential buyers.

  • Has financial resources
  • Is capable of making big decisions
  • Displays reasonable expectations of what the business in question will provide for her or him

It’s important to understand that buyers are going to have certain expectations too. So be ready for questions that are similar to these:

  • How much will it cost to buy the business?
  • What’s the current debt?
  • What can be done to grow the business?
  • What do profits look like in both good and bad times?
  • What is the inventory like?
  • What is the average annual increase in sales?
Tips for Getting Maximum Value

Appearances Count: Fix the place up, potential buyers are going to be turned off if paint is peeling and the place appears run down. To them this looks like more money they will need to invest to make the business viable. Keeping a clean looking store is also general good business sense.

Eliminate Surprises: Go over every aspect of your business, review things with a fine tooth comb. You don’t want ugly unexpected problems regarding legal, accounting etc. rearing their head when you go to sell.

Hidden Value: Things such as proprietary products, techniques, secret recipes, custom software programs and employees are valuable. They won’t show up on your balance sheet though, but are important factors to consider when attracting buyers.

More Questions?

Visit our selling FAQ for more answers to the following questions and if you’re looking for more information, contact us!

  • What business brokers can and cannot do?
  • What can I do to help sell my business?
  • Why is seller financing important to the sale of my business?
  • How long will it take to sell my business?