Steps to Take Before Listing Your Business for Sale
If you’ve decided to sell your business, you might already be looking forward to what you’ll do after the sale is complete. However, the decision to sell is just the beginning.
If you want to maximize your profits and avoid potential pitfalls, it’s essential to take a few key steps before putting your company on the market. Here’s a closer look.
Get an Accurate Business Valuation
You might already have a general idea of what your business is worth, and online calculators can give you a rough estimate. However, if you’re selling your company, you need an in-depth, expert business valuation. If you don’t know how much your company is worth, you could unwittingly shortchange yourself.
Business brokers often perform business valuations themselves or work with certified business appraisers. If you don’t have a recent business valuation, your broker should be able to help you get one.
Gather and Organize Financial Records
When a buyer is considering purchasing your business, one of the first things they’ll look at is your financial records. These are some of the most important metrics for potential buyers:
Revenue over time and current revenue trends
Cash flow
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
Gross margin (funds remaining after direct costs are paid)
Net profit margin (funds remaining after all expenses have been paid)
Having well-organized financials can help reduce the stress that comes with selling your company. If a buyer asks to see financials and receives incomplete or disorganized documentation, they may be concerned that the rest of your company is disorganized, too.
Assemble Your Team
Selling your business is a major undertaking. Before you begin, it’s wise to assemble the right support team. Many business owners choose to hire the following people before they sell:
A business broker
An attorney
A CPA or other tax professional
A wealth manager
You might think that paying for attorneys, tax professionals, and wealth managers is unnecessary — even a waste of money. However, hiring them will often save you money in the long run.
Attorneys can prevent costly legal problems, and the right tax professional can help you avoid getting into trouble with the IRS. The right wealth manager can help you strategically invest the proceeds to get the most out of your money.
Take Steps to Improve Profitability
It’s never a bad thing to improve a business’s profitability. However, doing so right before a sale is particularly important. Potential buyers are willing to pay more for highly profitable businesses, especially if their profitability is trending upward.
Don’t Be Intimidated by the Sales Process
The process of selling a business is complex. Fortunately, you don’t have to handle the sale alone. Business brokers don’t just step in when it’s time to market your company — they can also guide you through the pre-sale steps you need to take.
It might be tempting to try to sell your business quickly. But when you take the time to prepare, you’ll likely be rewarded with better profits and a smoother experience overall.