How much profit do you want when you sell your business? Just a little bit? Or as much as possible? This may seem like an easy question to answer, but many business owners leave money on the table when they put their business up for sale.
It’s All About Timing
Sometimes you have to sell your business when the timing isn’t good. Otherwise, the amount of profit you take away from your business is under your control. This article addresses some of the key things you can do to sell your business for maximum profit.
Most businessmen are interested in making a profit. The ability to increase your income above expenses defines success in business. When you choose to sell the company you’ve built, you want nothing less than this same standard. Who would want to sell their business for a loss?
When determining the price for your business, you may feel like you’re at the mercy of the market. But the truth is that there are several things you can do that will affect both the actual and perceived value of your company.
If you want to maximize the profit you can realize from the sale of your business, then you should keep in mind some of the following suggestions.
Make Sure You Are Prepared
Deciding to sell your business is not a move that you take lightly. It’s a big event in the life of any entrepreneur. Later in life, you’ll probably look back on the sale of your company as one of your biggest business deals.
For many, selling a business is a defining moment where years of hard work are transformed into cash. As you might expect from an event of this magnitude, selling a business takes a little more effort than placing an advertisement announcing the sale.
The sale of a business is a process and requires step-by-step preparation to be successful.
It’s All About Timing
First of all, if there’s any way at all you can control the timing of your sale, you should try to sell your business during an period of economic growth.
When economic times are good, you can typically sell your business more quickly and receive a higher price compared to selling during a downturn. Sometimes you can’t avoid selling during a recession, but you should be prepared to have a harder time putting together a successful sale.
It goes without saying that you should be tracking specific industry trends as well. Sometimes the economic health of your business sector will outweigh the effects of the general economy–in both directions.
If you have the freedom to choose when to sell, you’ll be happier with the result during times of growth.
A Strong Economy Helps
Getting the most profit from the sale of your business means being prepared to prove to potential buyers just how well your business is performing. Most buyers are in the market to avoid business failure in the first place.
They are looking for businesses with a good track record. If a potential buyer even suspects that you’re selling because of financial difficulties or losses, the price you can get for your business will drop.
Most buyers are not interested in rebuilding a bad business–they want to pick up a winner and run with it.
You should get used to the idea that you’ll be telling potential buyers all about your business dealings. Full disclosure is expected and required. You don’t need to spill everything to every shopper that walks through the door.
Only qualified buyers who have signed a confidentiality agreement need to know the details. But once you are negotiating with a serious contender, you must be transparent and honest or the buyer is likely to walk.
Get an Independent Valuation
Every seller should consider getting professional consultation when setting the price of their business. You may find this hard to believe, but most business owners tend to undervalue their own business.
Unless you have lots of experience in calculating the value of assets and equipment, a business broker may be able to help you recognize the true value of what you’ve built. You’ll also get the advantage of being able to compare your business with other companies that have recently sold.
Be Involved in the Selling Process
Don’t discount the value of your own experience, though. Even if you engage the services of a business broker, you should remain an important member of the marketing team.
You have knowledge about your own business that no one else shares. You also bring specific industry experience to the table. No experienced business broker would even think of leaving the owner out of the loop.
Confirming your role in the sales process should be part of any initial conversations you have with a potential business broker.
Make Your Business Attractive
Perhaps the most important way to get the most profit from the sale of your business is to get inside the head of the buyer. Try to step outside yourself and view your business through the buyer’s eyes.
What strengths or weaknesses do you see? What are your concerns? Why would you want to buy this business?
Empathizing with the potential buyer will make it easier to respond to their questions. In the long run, this will build trust and help the buyer justify the purchase for himself.
Successfully selling a business isn’t that difficult, you just need to know the correct way of doing thing.
Author: Andy White
Andy White holds a Masters of Business Management and after a career as an Officer in the Australian Army, worked as a Business Consultant and now operates his own successful Real Estate business on the Queensland coast.