Selling property, a house or a business takes a lot of organization and hard work. There are legalities to be aware of, financial statements and planning to provide and a host of other responsibilities. Knowing ahead of time what you will need and preparing in advance the financial documentation will benefit you when you begin the selling process.
Steps you Need to Follow to Sell your Business
Getting the Business Ready for the Market
- Before you think about putting a business on the market, you need to be sure that it is in top shape and marketable.
- Look at your business from an outsider’s perspective. Is it neat and clean? Make sure any repairs are fixed and the paint is not faded or chipped.
- If the business has a yard, be sure to have the area nicely landscaped and well maintained.
- All prospective buyers (and their bankers) will want to see at least three to five years worth of financial statements, tax returns, etc.
- Your financial records will show the prospective buyers your profit margins. Do not be overly concerned if you do not have high profit margins.
- You should already have a business plan that you created before starting your company. Update the business plan to include projections of profits for the next five, ten and fifteen years. Buyers will be interested in this. If you do not have a business plan, be sure to create one before putting your company on the market.
Determine the Value of Your Business
- The type and condition of the business have a lot to do with determining its value.
- If a business is in need of major repairs or doesn’t have a good profit record, the value can be based on the assets within the company. Intangible assets can include items such as an established client base, brand name and permits.
- If the business is doing well, the value may be determined by cash flow and profit expectations. This is where the business plan would come in handy as it will show the projected profits for the next several years.
Prepare a Selling Memorandum or Selling Book
- This book is very important as it tells the buyer the factual aspects of the company as well as ‘selling’ these aspects of your business.
- You will want to include an introduction about your company. List the type of ownership (corporation, individual, ect) and a brief history of the business.
- Put in the selling terms; the price, terms, length of contract, etc.
- Discuss your customer base, products and equipment so that the buyer will get an idea of the opportunities they will be getting by purchasing your business.
- Include financial information such as a detailed five year business plan and explain the last three years of your financial statements.
- Negotiating is a big part of any type of sales, and selling a business is no different.
- Negotiate your needs. For example, do you have certain employees that you would like to continue working for the company even after it is sold?
- Negotiate the terms. The price is important, but the terms will make the deal. Perhaps the buyer needs more time to pay off the loan or you need a larger down payment.
- Setting the Price. You’ve already set the price in your selling book, now let the buyer suggest their offer first and begin negotiations from there.