There’s no better way to sell a business in the US than to prepare it for a successful sale. Preparation allows you to minimize potential purchase price adjustments in the due diligence phase. After all, the purchase price often goes down, not up.
Selling your small business is a once-in-a-lifetime event. You need to plan in advance if you are to maximize profits. Unlike selling a boat or real estate, you need to start the process soon enough to get the most out of it.
Prospects usually look at the performance and financial records of a business three to four years leading to the sale. So you want to begin a mid-term project to sell your company. With that in mind, here is the best way to sell a business in the US.
Determine the value of your business
If you are like many small business owners, you probably assume you know what your business is worth. But the reality is that the number in your mind is usually way off from the actual value. So, before you quote the sale price, it’s best to get a valuation expert to help. A business valuation will give you a realistic estimate of your business’s worth.
It’s a good idea to bring in an expert appraiser to determine the company’s value with detailed documentation and report, especially for a fixed amount. You’ll need this report for credibility reasons should the prospective buyer question the amount.
In case you decide to handle everything on your own, then there are three ways to value your business. You can use the asset-based approach, earning value approach, or market value approach. But still, you’ll need to consider factors like industry trends, assets, liabilities, similar businesses for sale, etc., when valuing your business.
Organize your financials
With business valuation out of the way, your next step is to get your financials in order. The selling process shifts the focus to financial records. Lawyers, accountants, potential buyers, specialists, brokers, third-party valuation firms, and other interested parties will want to analyze your financial statements. So, ensure that details like income statement, profit and loss statements, balance sheet, etc., check. Don’t forget to include your tax returns details. It’s even better if you can provide tax reports dating back three or more years.
Potential buyers and their team of experts will spot any inconsistencies in your financial details and mark them as red flags. That’s why the importance of aligning your financials can never be overemphasized.
Hire an experienced business broker
Depending on your expertise in small business sales, you may choose to do it alone or bring in a business brokerage firm. The latter removes the stress from the process and allows you to focus on your core duties. Besides, business brokers live for this. So they have a good grasp of everything, including the market. They also have a vast industry network of buyers and sellers, brokers, and other industry specialists. Business brokers are the missing link between you and your prospects. A good business broker will:
- Help find the best buyers
- Market the sale
- Offer confidentiality
- Get the deal financed
- Manage due diligence
- Help with negotiations
Since there are hundreds of brokers in the US alone, it is essential to do thorough research to identify the best one for the job. A good broker will handle the sales process end to end. But if you’d like to go all out and advertise your business for sale, then here are some places to find prospects.
Approach prospective buyers directly
Prospective buyers could range from the company’s shareholders and employees to competitors and investors. Usually, these are people who have an interest in your type of business. But you may also get people who want to buy your business to join the industry. Either way, knowing your target audience and contacting them directly about your coming sell is one of the most effective ways to sell your business in the US.
Advertise in trade journals, newspapers, or on the internet
Your customer base could be offline or online. So you want to tap into both outlets to maximize exposure of your advertisements. While at it, make sure your “business for sale” ad stands out from the others sharing the same platform as you. Today’s clients are easily distracted. They also have a short attention span. So unless your copy captures their attention within a few seconds, you might miss out on opportunities. Here are some quick tips to help you draft an effective ad:
- Offer a concise, yet thorough description of your company – the ad should provide an overview of your company and why it’s a good investment. Be careful not to stretch the truth or present information that you cannot justify as accurate and true.
- Don’t give away your business identity – try placing ‘blind ads’ that don’t give away your company name or address. Blind ads conceal your identity by explaining attributes without giving away facts that people can link to your company. You can also take advantage of identity-protecting features on business for sale listing websites.
- Provide clearly defined purchase requirements to help buyers self-qualify – include your business’s yearly revenues to help prospects decide whether your company is too small or large to match their interests. You should also state the asking price to allow only buyers who can match up to respond to your ad.
- Request inquiry responses that enable you to pre-screen buyers – try to avoid the generic contact seller for details. Instead, ask for specific info from prospects, like why they are buying a business, their experience, financial ability, and approximate timeframe. This gives you a better shot at getting serious buyers.
- Track your ads – if you place ads on different channels, you should monitor them to know which ones are working and which ones aren’t. This will allow you to tweak the ads or focus on outlets that are performing better. Since a business takes about 6 to 12 months to sell, you’ll most likely be renewing your ads. So tracking is definitely vital.
Word of mouth
As the name suggests, this method involves spreading the news of your business for sale through word of mouth. It is an inexpensive way of getting the word out there, making it an appealing option for entrepreneurs who want to sell a small business. The only downside is that you won’t guarantee that the right people will learn of the sale. Again, it might cause unrest in your business when employees learn about the sale.
If you are thinking of selling your business, consider using an experienced business broker from BuyOrSellBusiness.com to ensure you’re getting the best price for your business.