Owning your own business usually means investing not only your time and energy but considerable funds to help it succeed and thrive. After pouring yourself into your business, how do you know when it’s time to sell? And, when you make the decision, what is the best way to get the most profit?
In today’s market, sellers need to take the necessary steps when preparing to take their business to market or entertain realistic offers.
From the “sell side”, companies need to ensure that all of their financial documents and records are accurate and up to date. Specifically, that their financial statements and tax returns are consistent and that their earnings and cash flow are significant enough to justify the initial asking price. Also, it’s a great idea for prospective sellers to have their assets valued by an independent Certified Valuation Analyst prior to listing. This process enables sellers to determine, as much as possible, the real value of their business and flag any potential financial issues that may arise during the negotiation of the sale.
When selling or preparing to sell your business, there are several “preliminary” responsibilities that need to be addressed before the business hits the market. Here are a few items to consider:
- Maintain accurate and reliable financial and operational documents to ensure simplicity and accuracy when negotiating the specifics of any deal and responding to future requests.
- Update all company records and documents to reflect changes in personnel, ownership, products, services, or other significant changes that impact the business.
- Have the business “valued” periodically (generally every 2-3 years) to make sure owners are aware of the fair market value and are prepared to entertain purchase offers.
- Have qualified experts capable of conducting “due diligence” on behalf of the buyer.
- Establish agreed to time-lines for each phase of the purchase process so that buyer and seller can be held accountable for their responsibilities prior to closing.
- Maintain good communication between the parties in the event there is any change in the buyer’s or seller’s condition or ability to close.
Many experts believe that the best time to sell one’s business is when it is at its peak. This is the time buyers will get the best snapshot of the profits a business can bring in, and the seller will be able to leverage the business’ success to ask for a higher selling price.
No matter when you feel the time is right, having your financial and business records in order, understanding how much your company is worth, and utilizing experts to guide the selling process will help you complete a successful and hopefully profitable sale of your business.
For more info on buying and selling a business or answers to your questions, please feel free to contact us at firstname.lastname@example.org and stay tuned to our next post.