How to Prepare to Sell Your Business

sellbiz1New job applicants get haircuts, shine their shoes, and practice their interview skills while preparing to hopefully land a position. Those seeking to sell a home often repaint inside and out, primp the landscaping, and clean from top to bottom before hosting an open house.
And a business owner who hopes to receive a fair price for his or her company would be wise to engage in such “dressing up” activities as well. While it may go without saying, putting your best foot forward is always the best strategy to maximize the value of any sale.

The Importance of Seller Objectivity

Achieving a sale at the price you want means that you should look at your company as objectively as possible, problems and all. This prepares you to counter any buyer’s objections or degradation of your company’s value, and allows you to maximize assets and minimize (or at least be prepared to handle) flaws.
Recognize that it is easy to get an inflated sense of importance, especially when a stranger comes calling with an interest in buying your company. After all, starting and running a successful company is not an accident, nor a matter of luck. Long-term business success requires a combination of intelligence, guts, and hard work.
As a consequence, many owners assume interested buyers understand the business opportunity and profit potential of their company. They presume that an acceptable offer will be forthcoming, only to be surprised when the would-be buyer tells the owner that their baby – the company – is ugly.
Getting the highest price for your business requires a thorough understanding of the opportunities and threats facing your business. Potential buyers focus on the future of a business, not its past. Accordingly, why would any potential buyer be interested in your company? Does it offer unique products or services? Does it dominate its geographic and industry markets? Does it have capabilities and capacity that are difficult or expensive to replicate?
Buyers are most interested in those companies whose products and services are in growing markets with unrestricted pricing flexibility or obvious expense reduction possibilities. They seek under-utilized – but valuable – assets that can be exploited, especially by the potential purchaser. Similarly, any threat to the business must be identified, quantified, and strategized.
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7 Questions to Ask Before Selling Your Business

sell-biz1Each year, thousands of small businesses change hands. Some owners decide to retire, others need new capital to exploit market opportunities, and some businesses fail and are liquidated.
According to the Fourth Quarter 2014 Insight Report, 7,494 small businesses traded hands during 2014, the largest number of transactions since BizBuySell starting tracking sales data in 2007. While higher than previous years, there are approximately 45,000 small businesses—ranging from restaurants and retail stores, to service and manufacturing companies—available for purchase at any given time.
The motive to sell can arise for both negative and positive reasons. Sometimes, plans do not work out, and business results fall short of expectations. While in the best of circumstances, buyers – drawn by the success of a business – make unsolicited offers to purchase the business. Either circumstance can dictate the potential sale.
Unfortunately, not all owners have a choice whether to sell their companies. The failure rate of small businesses is extraordinarily high, with almost half going out of business before their fifth year, according to Statistic Brain.
Despite their initial optimism, many owners regret starting their business, no longer hoping to get the cheese but to get out of the trap. In such cases, the owners’ objectives are to achieve the highest valuation possible to reduce their losses and restore their business reputation. If a liquidation appears likely, competent legal and accounting advice is essential. Owners may also consider retaining the service of an experienced business broker to help present the company in the best possible light and negotiate favorable terms of sale.
If your business is a successful operation, you may find that potential buyers or their representatives regularly solicit the purchase of your business, perhaps accompanied by preliminary (though very attractive) estimates of market value. But before putting your company on the market or engaging in negotiations to sell the business, there are a number of questions you should resolve.

Questions to Consider Prior to Selling Your Business

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