What Needs To Be Done Before You Sell Your Business?

Andy Anderson

selling a businessOne of the most stressful times in an entrepreneur's life is when they prepare to sell their business. Whether the reasons are family-related, financially motivated or just retirement, there is always a certain amount of fear about the unknown. If you are considering a business listing in a "for sale by owner" directory, or placing an ad in an industry publication, you might want to do some homework first.

According to a recent article in Entrepreneur, "4 Things to Do Before You Sell Your Business" (by Brian Patrick Eha), sales of small business rose last year and brokers are expecting even more robust sales in 2013. This information was gathered in a recent survey released by BizBuySell, an online business marketplace. The article also warns that last year's spike in business sales was prompted by concerns over the fiscal cliff and then furthered by the expected cost implications of a second term for President Obama.

How long does it take to prepare a business for sale?

Selling a company is not the same as selling a residence. With a home, you might just need to install some new carpeting, plant some flowers and freshen up the paint; but with a business the preparations can be far more time-consuming. According to most business brokers, the right time to start preparing a business for sale is about two years beforehand. The more you prepare in advance, the more likely you are to get close to your asking price. Given the fact that it typically take 6 to 9 months for a business to sell, if you expect there to be a limited pool of potential buyers you might even want to start sooner. Keep in mind that there are several steps that should be taken before listing a business on the market.

Before you list your business for sale, here is what needs to be done:

1. Get your books in order. In order to be certain that your business is performing as smoothly and profitably as possible, you will need to do a thorough assessment of finances and operations. In other words, get your house in order! Now is the time to assess expenditures, cash flow, tax strategies and many other elements of your business' operations to determine if they are optimal.

2. Timing is everything. It's always much easier to sell your business when things are going well. For seasonal businesses especially, owners should seek to sell soon after their busy season begins. With a little advance planning, you won't find yourself desperate to make a deal during a slump.

3. Ask the experts. Don't ever think that seeking expert assistance is something to be ashamed about. You will probably need help just getting to a buyer-friendly price, or structuring the sale in a way that makes sense from a tax perspective. Consult your accountant or consider hiring a business broker to handle the details of the sale.

4. Find ways to demonstrate a bright future for the business. The number one motivator for someone to buy your business is your proven track record, but they should also be looking at future potential. Most business brokers will put together a "growth strategy" to show potential buyers. With your intimate knowledge of the operations of your business you can point out opportunities for a buyer to expand the business further. While this might take a few days to complete, a growth strategy may pay substantial dividends in a sale.

No matter how much you try to sell someone on the attributes of your business, it won't help much if they are not a qualified prospect. Find a qualified pool of potential buyers by listing with an online business-to-business marketplace. While you're at it, take some time to peruse the site and see how other businesses are marketing themselves in your industry. By taking these additional steps, you can increase demand for your business while at the same time demonstrating value.

Photo Courtesy of Stuart Miles / FreeDigitalPhotos.net

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