7 Essential Steps to Sell a Business and Maximize Profit : If you want to sell a business think about this for a moment. To do it successfully requires significantly more than hanging a “For Sale” on the front door. Selling your business is serious stuff. It’s not just a question of how much you can get for it, it’s far more involved and the question is, are you the best person to handle it? Take a look at these seven essential steps and then make a decision regarding brining in a pro.
Just what is your business worth? Literally hundreds of books have been written about this subject and there is no definitive rules but there are two basic guidelines. If your business is profitable then your price is typically determined by using a multiplier times annual profit or sales. If your business is marginal or operating at a loss, then the price will be based on the value of your assets. Each industry typically has a starting point multiplier that is increased or decreased based on the business for sale.
Have a plan and work the plan. Before you do anything you need to reduce to writing just what it is you are trying to accomplish. Why are you selling? What’s the financial objective? How will you market and to whom? What terms and conditions will you accept? Having a roadmap makes driving to the sale a much more profitable experience.
3. Package The Product
You’ve probably spent a good amount of time and money marketing your goods or services and building your brand. The same kind of effort has to go into packaging your company as a great buying opportunity. Focus on the benefits to potential purchasers be it price or terms or patents.
4. Marketing Plan
Before you place that ad in the local newspaper, think about how you want your potential buyers to learn that your firm is on the market. Often times there is value in doing discreet marketing using only the network of contacts that you have already developed. The more targeted your marketing, the more sincere inquiries you’ll receive. Marketing to a broad audience will generate more leads but not necessarily qualified leads.
If you enjoy horse trading, and most entrepreneurs do, then you might enjoy this phase but be sure to keep your eyes open to the whole picture. It’s not just price. It’s how much, when, and with what conditions. Getting a great price but losing out on terms or conditions can be a costly mistake. Identify the limits that you will accept in negotiations before hand.
Like it or not, this is one part of the sale where you are going to have to rely heavily on others and it will task your managerial skills if this is your first go at a sale. Think about it for a minute. You’re going to have to coordinate with attorneys (your own and the buyer’s) accountants, banks, suppliers, lease holders and benefit providers in order to get a smooth transition. This can’t be done shooting from the hip. You need a detailed check list ti ensure there are no surprises later.
7. Transition and Exit
Congratulations, you’ve sold your business. What are you going to do now? Visit Disney World? Probably not. Even though you probably don’t have an ownership position, your future take from the sale will most likely depend on a year or two of the business continuing to do well. It’s in your best interest to have a written plan to communicate the sale to your employees. A smooth transition without personnel turbulence can be a money maker for you in the long run.
Now back to the original question. Are you the best person to handle all this? If you think you need some outside help then it’s time to search out a professional business broker who can do the heavy lifting and insure your sale is both profitable and as painless as possible.
Mark Polman is an experienced business management expert and has some great ideas if you want to sell a business in Dallas or Two Hogs. Seriously, if your business has a value of greater than $100,000 you really need to investigate getting professional help to maximize profits and minimize risk when selling your business.