Selling your business is an important decision and one that could affect you for the rest of your life. Maybe you decided to pivot into another direction, feel like you’re too old to run it, or simply decided to leave the entrepreneur life behind. No matter the case, you have to make sure that your decision was well thought out and that you get what you deserve for your business. Here are some questions you should ask yourself when selling your business.
Is Selling Actually the Right Idea?
The first thing you have to do is make sure that you’re selling the business for the right reasons. You don’t want it to be a knee jerk reaction to temporary market conditions or a gut feeling. If it’s due to personal circumstances, you have to make sure they’re insurmountable. You don’t want to end up regretting your decision.
However, if you feel like your business is making you miserable and taking away too much of your personal life, then it’s a valid decision. Don’t stay in the business out of fear and see what you can get for it. Maybe this would be enough to allow you to retire comfortably. If you feel like your heart is not into it, then it might be a good idea to sell, even if the business is doing well. At least you’ll be able to get a better valuation by selling your business while it’s at its peak.
Does My Valuation Make Sense?
Many people may have their idea of how to evaluate their business. A common one is using a yearly income multiplier. While it can give you a general idea of how much you can fetch for the business, many other factors need to be taken into consideration.
This is why you should consider working with professional business valuers before you think of putting your business for sale. Valuers like WA Business Valuations, for instance, will make sure to look at other things that could affect your valuation, like outstanding debt, assets, and market conditions among other things. They will also make sure that your valuation is realistic and won’t end up deterring potential investors.
Do I Have My Paperwork in Order?
Even if you think you’re ready to sell, it doesn’t mean you actually are. You can expect buyers to do their due diligence and ask for specific documentation. Some of the things you will need to produce include profit and losses reports for the last 3 years at the very least, some BAS statements, a copy of your lease, two years of tax returns, information on your stock level, and the value of your equipment and plant on the second-hand market.
You can also go a step further and have a competitive analysis of your business, market position, and demographic information on your client base. This will may be heading.
Is There an Actual Market Demand?
If you’re selling your business because there’s a dip in the market or you’re in an overcrowded space, you can’t expect people to just come and scoop up your business without questions. You can expect to see some pushback and you might have trouble finding someone to accept your valuation.
Timing is also very important. Choose the wrong time and you could potentially lose thousands on your valuation. This is why it would be a good idea to speak with a business broker. These people sell businesses for a living and know exactly when it’s the perfect time to sell.
Ideally, you want to sell when your earnings are up, but that doesn’t mean that you won’t be able to find sellers. You might have to revise your expectations, however.
Can The Business Survive Without You?
This is another factor a lot of sellers tend to overlook. If you’re a family run business and it’s a for instance, some buyers might see it as a risk. You’ll need to be able to show how your business will be able to operate without you and that you are not the primary source of goodwill for it.
You need to take a look at how your business behaves when you’re not there to oversee the operations. You should also consider restructuring if possible and forming a successor if you were the main manager. Another thing you might do is give the buyer a longer hand over period. This could help minimise initial fears they may have.
Selling a business is not an easy decision, so you must take your time and know what will be expected of you. You also need to understand the procedure and do everything to get the best deal possible for both of you.