5 Steps to Selling Your Small Business

Selling your business? While this might sound like a highly complex legal and financial process, it is actually easier than you might think. In this post, we will take a look at five simple steps you need to take to sell your business.

1 Market Research

Step one is to do some market research. Take a look at the current state of the market. Is now a good time to sell? Is now a good time for buyers to be interested in your business?

Take a look at the price that other companies similar to yours are getting. Would you be happy with roughly that amount?

It’s also a good time to look at the kinds of deals that can be done and to decide how you want to proceed. Will you remain at the business in a consulting role? Will you sell the entire business, or only certain aspects (such as a client list and brand)? If you have more questions, then consult with an advisory firm.

2 Accounting and Preparation

Once you have decided you definitely want to sell and you have an idea for the kind of deal you’re looking for, step two is to prepare your accounts and your documents. Make sure that you have all the necessary legal documents, and that you have a good idea of the amount your business earns and spends each year. This will help with valuation, and will allow for a smooth transfer of ownership.

3 Business Valuation is a highly useful skill for anyone in business – whether you’re purchasing a company or investing and want to make sure you’re not paying over the odds for something that isn’t really worth anything and won’t bring you in any profit; monitoring the performance of your own business; or you’re selling one and want to make sure you’re asking for a reasonable price that’s fair for both you and the customer. However, it’s not a straightforward matter and there are multiple different ways you can ‘value’ a business. In some ways you could even say that it’s not really possible to come up with the value of the business – because it’s subjective, because things could change any moment and because different people can do different things with it. How do you put a price on the loyalty of a customer or on a hardworking staff member? How do you evaluate the potential profit of a breakthrough idea still in its infancy? For this reason, there are many different methods of business valuation – ‘earning multiples’, ‘entry cost’, ‘asset valuation’ to name just a few - and it’s your job to pick the one that best reflects the worth of your company.

4 Find a Broker

A broker will help you to find the best buyer, and will then help you to get the best deal possible. While you could potentially sell without a broker, they will almost always help you to get more for your business. So research brokers and get in touch once you have a plan.

5 Negotiate a Deal

Finally, it’s time to negotiate a deal. Being smart about this can help you to earn more. Your broker will help too, and because you’ve done all this preparation, you’ll be in the best possible position to come out on top!

There are plenty of strategies that can help you to come to the best arrangement. Consider the “ZOPA” for example, which is the “Zone Of Possible Agreement.” The sooner you work out what this is, the better the negotiation will go for everyone.