Key steps for selling your small business
When you bring your business to market, you want to ensure it’s an appealing prospect to potential buyers and that you have everything in place for a smooth sale. While you might hope for a quick transaction, in reality, finding the right buyer may take a number of months and is a process made much easier if you’ve kept your paperwork in good order over the years.
Have you planned your exit strategy adequately? Let’s take a look at the key steps of selling to help you plan your future.
Preparing for a sale
It’s far easier to sell a business when the sector it operates within is doing well, and the business itself is also performing. However, even if the market is great and business booming, you’ll need to prove stability and make just what’s on offer very clear. With this in mind, as you get ready to sell, don’t be tempted to take your eye off the ball or let your standards slip even if and when an offer has been accepted. As sales can take some time to process, the potential loss of valuable supplier relationships or things like poor reviews could put a spanner in the works or even halt a sale.
It’s essentially you carry out a thorough due diligence investigation before putting your business up for sale. This should prove useful in highlighting areas you need to address and also help you to put a value on your business. No one wants to purchase a business that runs on systems and processes that exist in your mind only, so take the time to map out how everything works on paper.
You should also make an inventory of equipment and assets, including information on servicing and any hire agreements. It goes without saying that your accounts and tax history need to be in order. Talk to your accountant about your plans and don’t leave sorting out all the important financial information until the last moment. Genuine buyers will want to be able to appraise the business quickly and easily, and that means having claims of profit and turnover evidenced and to hand.
For businesses residing within a leasehold property, it’s essential landlords are in the know and on board in advance of a sale. You may or may not feel comfortable discussing your plans with staff, but you will need to consider their future employment and adhere to any contractual obligations.
Advertising your business for sale
When you’re confident you’re ready to sell, it’s time to set your price and choose your platform for selling. It’s not uncommon for those running small businesses to give prominent staff first refusal on the purchase. For example, if you own a cafe or restaurant your manager or chef may be well placed and keen to take over the reins. If you’d like to explore this option first, be careful not to muddy the waters or let personal relationships overcomplicate the sale.
Using a broker is the more traditional option but one that can come with steep fees. You may feel that a broker’s awareness of the local market will help you to set an appropriate sale price and their knowledge can indeed be valuable. If you do choose to go down this route, be sure you know what will be expected of you during the sale when it comes to things like viewings or documentation supply. Make sure you’re also crystal clear about the fees you’ll be paying and what they will buy you in terms of advertising and account management.
If you’d prefer to do it yourself, there are some great resources and websites where you can sell your business for an affordable fee. Researching other similar businesses for sale in the area and further afield along with the assets and turnover they are listed alongside is a good starting point for setting your price. Try finding businesses for sale and entering key details into a short spreadsheet to inform your pricing strategy. You may also want to make a note of what you think works well in adverts for when it comes to putting your own ad and sales profile sheet together. Along with key snippets such as profit and turnover, make some short notes about your reasons for sale and any areas where you think there’s still potential for business growth.
Showing and vetting
When you’re trying to sell your home, you try putting out fresh flowers for viewings and clear away any clutter so that buyers can think about how they’d put their personal stamp on the property. With business sales, you really need to emphasise the strength of your business model and know who your customers are. Again, insider knowledge and research is your friend here. Take a look at similar businesses on sale in the area, know your USP and be sure to dig into the backgrounds of potential buyers too. Knowing what’s behind people’s motivation to buy can help you to sell them the most appropriate features and strengths of your commercial enterprise. And of course, getting to know your buyer can help you sort the time wasters from serious parties.
In addition to viewings, depending on your field of business you should be prepared for attempts to dig beyond the surface of figures and paperwork. For instance, it’s not uncommon for buyers to ask to spend time working in a business so they can see if your numbers and claims stack up. If you’ve taken the time to put all your affairs in order in advance of coming to market, this should hopefully be a formality that helps you seal the deal.
In the ideal scenario business owners may prepare for a successful sale for many months or even years in advance but this isn’t always possible. If you’re hoping to sell soon, don’t forget to check your legal responsibilities as a sole trader or as a limited company first.
