6 Steps to Sell Your Business for Maximum Value

Selling a business is a difficult task. For most business owners, the idea of selling can be the beginning of a never-ending headache. When you are unsure as to where to start and how to go about the process, you are not guaranteeing yourself the best outcome. By following the right steps, you can learn how to sell your business for maximum value, moving on successfully to your next venture. The more prepared you are, the more you can earn with the sale.

Step 1: Set Up A Professional Valuation of Your Business

The process of placing a value on a business is not straightforward. There will be many factors to consider. To get the most for your business, it is recommended that you hire a third-party valuation firm. With professional help, the valuation of your business will be correct and you will be able to bring credibility to the asking price you seek with the sale.

The appraiser of your company will be looking at sales and inventory, debts of the company as well as other assets to be able to help you set a realistic price point. With the valuation, you will need to present not only cash flow information but also a plan on how the business can grow for a prospective buyer. The buyer needs to be able to see how they can move forward with your business long-term.

Step 2: Organizing Business Financials

Due to today’s economy, a potential buyer is not going to purchase a company that will not be profitable as well as have viability for the long run. Because of this, buyers will take longer to consider a purchase before an offer is made. Everything will be considered by the buyer, so it is important to have all business financials organized.

Work with an accountant or a business consultant and review your financial statements as well as tax returns. You want to look at information from a three to five year time frame. For the sale, make a list of inventories as well as equipment you wish to offload. This will include any intellectual property and intangible assets.

Buyers are looking for turnkey operations, so having your financials in order and showing how business is conducted is a plus. Present all documentation in an organized manner in a way that is useful to buyers.

Step 3: Increase in Sales

A potential buyer will only be interested in a business that has a healthy stream of income. Work to improve the overall performance of the company to maximize profits. Selling your business at a time when you are most successful will help to increase the sale price.

It is recommended that a business owner takes one to two years to prepare the company to sell. In this time, you can work on increasing sales. Most buyers want to see a sales growth of 30% year over year or more, a number that shows the business is thriving. The number of customers you have will also be given consideration. Buyers want to be sure the customer base you have will stay as they take over the company.

Step 4: Timing Your Exit

It is advised that business owners time the exit of the company in advance, at least a year or two. This helps to create the proper planning to ensure that the business will be ready to change hands for the most money possible. In this time frame, you can work to improve sales, gather financial records and grow your customer base. All of this will make your business more attractive to potential buyers.

Markets change all the time, so you must be well aware of the current trends in your business sector. You want to market your business as a leader in the industry when selling. Don’t wait until disaster strikes to sell. If you do so, you will earn far less than the maximum value.

Step 5: Locate a Third-Party Business Broker

Hiring a business broker is the best way to get the maximum value for your business sale. You will also have help in locating the ideal buyer. With a third-party business broker, you have an individual that can help you with the valuation of your business, negotiation and due diligence. The broker can also help potential buyers locate funding by tapping into a network of financial institutions and private lenders they work with.

Step 6: Qualifying Potential Buyers

When speaking to a potential buyer, ask a few important questions. Make sure they have secured funding or have the necessary capital to move forward. Find out if they have business experience and/or are able to operate the business. What is their timeframe? Are they ready to purchase your business immediately or do they need a certain amount of time?

Reviewing this information with a potential buyer can weed out any individuals or groups that may not be ready to take on the acquisition.

Maximize The Value Of Your Business

By following these steps, you will have more success at obtaining maximum value for your business. Get started with a strategic plan today to begin on the path to selling your company and earning the maximum profit possible. For more information, check out the infographic below provided by Colorado Business Brokers.