Selling ones business or empire, does not seem like something that one would ever consider doing. For many reasons – be it sentimental or otherwise – people tend to want to hang on to a business they have nurtured and grown even when it is at the brink of death. Putting up your business for sale may not be as bad as people see it. On the contrary, it can be the best decision you have ever made.
There are a number of reasons why you would want or need to put up your business for sale. There is, of course, the very common reason; that is, because your business is doing poorly and it is in need of revamping, restructuring or a complete takeover. However, there are a few other uncommon reasons. Some include: when the owners are tired or the riskiness of the business, financial security, financial independence, to have personal time, or simply just for change.
Whatever the reason for wanting to sell is, what is worse than losing your business is losing your business for no little or no financial consideration or worse, losing it to scammers. No matter how much money one makes from it, there is still an attachment that goes with the business.
Hence, in order not to sell it to folks who will run it to the ground or who will scam you, it is important to know how to put up a business for sale and who to sell it to. You also need to be sure why you want to sell and if the reasons are good enough so you do not regret it later. As a guide, here are a few things you need to know on how to put up your business for sale:
The first step to doing anything or before taking any action – especially one as important as putting your business for sale. You have to know why you want to sell for starts. Are you selling because the business is experiencing a downturn or because you have legal pressure? Are you selling because you want to retire? In any case, the reasons for sale will always be a determinant as to how the entire sales process would work.
If you are putting the business for sale on the basis of financial and legal issues, then it would not only be harder to sell but it would also cost you money. That is, you would have to sell at a lower than expected price. Hence, you need to plan adequately because prospective buyers would want to know every little detail as this would be the bedrock of their negotiation. Decide on which kind of people you want to sell it to, why you are selling and what you intend to use the money for. It is important to not rush into a sales agreement without planning as even after making the sales, you could just squander it on nothing.
Prepare your Books
When you have adequately understood the basis for your sales and the means by which you want to achieve it, you need to start implementation. The first requirement of the implementation process is having your books and paperwork in order and readily available. Nobody is going to be willing to buy a business that is not properly documented for fear of fraud. Here are some of the financial statements and paperwork that you would need to get together before you attempt to put up your business for sale depending on the nature of the business:
- Memorandum and Article of Association
- Last three years’ profit-and-loss statements
- Last three years’ balance sheets.
- Year-to-date income statement
- Current statement of financial position
- Last three years’ full tax returns.
- List of furniture, fixtures and equipment.
- List of inventories
- Full list of debtors and creditors
- Commercial property appraisal or lease agreement
All these documents should be carefully evaluated and analysed with qualified accountants and tax consultants to ensure there are no discrepancies.
Value the Business
Business Valuation involves the set of procedures used to estimate the economic value of an owner’s interest in a business. Valuation is used by financial market participants and business owners to determine the price they are willing to pay or receive to affect a sale of a business.
The essence of valuing the business is to know the exact worth of the business for sale at a particular time. This way, you would be able to ensure that you do not price your business too high or too low. To get a proper valuation, you would need to obtain the services of a professional business appraiser.
You would need to take stock of the price of other companies or businesses that are in the same industry you are in and who are of similar size and structure. You also need to take cognisance of the goodwill you have accumulated over time. This includes brand name, consumer loyalty and others. After you known the worth of the business, then you would be ready to start the process of putting the business for sale.
Identify potential buyers
Next, it is important to identify your potential buyers. You may choose to get buyers personally or obtain the services of a broker. Whichever you choose, you would still need to carry out an underground research of your potential buyers for security reasons.
You have to make sure that the potential buyers are qualified for it. You have to assess their reason for interest in your business, background information, educational background, sources of funding, when they intend to complete the payment transaction and many more. Just make sure you search any nook and cranny to avoid any unfriendly surprise.
Negotiate and Sell
Finally, after finding a qualified and legit buyer, you would need to negotiate efficiently. Negotiation involves price bargaining, setting of conditions and the entire process of transferring legal ownership of a document. Before you agree to transfer your business to an individual or company, you must negotiate for a suitable (possibly win-win) price.
Usually, at the negotiation stage, you may have three or more potential buyers. The negotiation process helps you and your team reach a valid consensus as to who the business for sale would go to. Be careful not to base the entire decision on the highest bidder as you would not want to be chastised for giving the wrong person the power over your business. After proper negotiation, you can then sell as appropriate.