How to Plan the Sale of a Small Business?

Selling a small business requires careful planning for maximum profits. When planning the sale of a business, timing is everything. Any small business is attractive to buyers when the venture is making profits or has a strong and loyal customer base. Therefore, it is crucial to take steps at least a year before your actually plan to sell it.

Consider the below steps if you plan to sell your small business.

Value your Business

The first step is to value your business to determine its worth and to take any steps to rectify a lower valuation. You can hire a financial agency or business appraiser for the valuation task. The factors that can affect any business’s valuation are strong or weak financials, the state of the business, profit projections and of course the state of its industry segment.

When you hire professionals for your business valuation, they may use several factors for this task. These can be assets, debts, inventory and financial statements. There are other factors also such as the state of the market, location of your business, long-term business contracts you may have with other companies etc. Professional appraisers may also use EBITDA multiple by industry to arrive at a valuation of your business.

Organize your Financials

The valuation of your business can give you a clear idea about maximizing your profits from the sale. If your small business is not as profitable as it was a few years ago, you might want to wait a while before deciding to sell it. If waiting is not an option for you, you need to consider the financial loss from the sale that you might incur.

Also, if you feel everything is in order, you can begin to organize the paperwork to present to prospective buyers. Your business’s financial statements, vendor contracts, tax returns and leases are important documents. You might need these documents prepped and ready to show for at least last 3-5 years.

Prepare to Sell

Once your paperwork is in order, you can begin to meet prospective buyers. When selling a business, it is also about the financial health of the buyers. So, do your diligent research in this area also. It is always worth working with professionals to help you sell your business. Brokers can help you organize everything for a sale and also line up the best buyers for you.

Many entrepreneurs opt for small business retirement plans from their early years in business to protect their financial health. If you haven’t done any planning for your retirement, it is even more important for you to wait for the right buyer.

Be prepared to spend a lot of time in landing the right buyer and signing all the paperwork. Take your time when talking to each potential buyer and be flexible about negotiations. Take due care to protect all confidential information pertaining to your business by preparing the right paperwork and getting these signed from the buyer.

 

 

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