No matter how long you’ve owned a business, it’s never easy to let it go and sell it to someone else. Aside from any sentimental factors that may be weighing on you, you also want to get the money you deserve (around $275,000 on average).
However, far too many people make mistakes during the selling process. These end up costing them months or years’ worth of time, and oftentimes, a lot of money. So how can you go about making sure that you’re prepared to sell?
Keep reading to learn about what it takes to sell your business and get started on the next stage of your life.
Potential Income Won’t Get You Anywhere
Many business owners mark up the price of their business because they believe that the potential of their company is limitless. From their point of view, a little investment and effort will go along way. Remember that this isn’t how business works.
If the selling point behind your business is a concept, you’re going to have a hard time showing it off to potential buyers. Most people who think about buying your business don’t want to buy a concept, they want something with a proven track record of success.
If this sounds like your situation, you’ll need to either reduce the selling price or invest some funds to further develop your business.
Businesses Want Profits, Not Revenue
Another misconception that many sellers have is that high revenue figures are a great way to wow potential buyers. Again, what buyers want to see is clear evidence that your business is successful. Revenue can help with that, but it won’t matter as much as you might think.
Imagine that there are two companies. Company A has monthly revenue of $60,000, $55,000 worth of expenses, and therefore a profit of $5,000 each month. This ends up being $60,000 in profit per year.
Company B only earns $20,000 in revenue each month, but pays $10,000 in expenses, thereby making $10,000 in profit each month. This adds up to $120,000 in profit every year.
While the revenue stream of Company A is 3x greater than that of Company B, that means nothing, as the profits are only half as much. Any experienced buyer will be more interested in Company B, as they care more about profits than revenue.
Be Able to Verify Any Financial Claims
For every source of income that you show to buyers, make sure that you have verifiable proof to show them as well.
Invoices, deposits, and bank statements are some of the many things that interested buyers may ask you to see. In other cases, clients may ask to directly see your accounts online. Programs such as Skype or TeamViewer will allow you to verify any financial claims you make.
It may take some time to get all of your financial documents ready, but it will save you time in the long run. You don’t want to turn potential buyers away by being unable to provide proof of your company’s many financial achievements.
Focus on the Present
Oftentimes, sellers like to talk about how their business was booming a few years ago, and that all it needs is some work for it to bounce back. While that may be the case, buyers don’t think like that. They’re not interested in something they first have to invest time and money in to help recover.
Most of the time, buyers only care about the recent performance of your business. Generally, that means the last 12 months. They’ll use the trends they see there to predict what the future may look like.
However, if your profit margins have been growing for some time, don’t think that buyers won’t care about that. They love to see proof of steady growth. Showing them realistic plans and expectations for the future can also be a great selling point.
Be Honest
It should go without saying, but remember that you need to be honest when selling your business. You might be able to hide certain things for a period of time, but in the end, the truth will come out. Lying will only waste both parties’ time.
Any knowledgable buyer understands that all businesses have ups and downs, as well as pros and cons. They’ll weigh these factors when making a decision, so you don’t have to worry about making your business seem as perfect as possible.
Honesty and transparency will serve you well, as it reduces the risk of scaring buyers away when they find something out later on. If you can’t find a suitable buyer and need some help selling your business, view this business broker to get some help.
Be Prepared to Answer Different Questions
As more and more people quit their traditional 9-5 jobs and look for new sources of income, the number of inexperienced people who want to buy businesses has risen exponentially. These people often come with a plethora of questions.
Although many of the questions you get asked in the process may seem obvious or draining, remember to always stay positive and answer them with a smile.
You don’t want to judge a buyer, as you don’t know who they are. Although they might be ignorant about some things, this may be on account of being new to the industry. They might have deep pockets, and may just be the perfect candidate to take your business out of your hands.
Sell Your Business With These Tips
After investing thousands of dollars into your business, you want to make sure that you get your money’s worth when you sell it. By following this guide, you can be certain that you’ll be able to sell your business while making the process as painless as possible.
Do you now have a better understanding of how to go about selling your business? If you do, make sure to check out some of our other blog posts for more helpful business-related guides and tips.
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