Selling a business can be a stressful and emotional experience. It is important to think carefully about the reasons for selling and what you hope to achieve by stepping away from running the business.
If you decide to sell, ensure all your financial statements, tax returns, and material business agreements are in order. Problems in these areas can slow the process down and increase transaction costs.
Identify Your Goals
Before you decide to sell your business, setting goals and establishing a plan for success is important. Goals will help you determine whether your decision is right and ensure that you maximize the value of your business when it is sold.
First, you should identify your business’s top priorities and whittle them down to a realistic list with your current resources. It will allow you to determine which actions will impact your bottom line most.
Once you have a list of your top goals, it is time to implement them. A well-defined plan will keep you on track and ensure all your sales goals are met.
Your team is your best asset, so involving them in the planning is important. It will ensure that you are setting sales goals that are suited to their capabilities and that you are working to improve the strengths of your team.
Another factor to consider when setting your business’s goals is the revenue you expect to earn this year. Learn more from anybusiness.com.au/business-for-sale/nsw/ to help you set goals that will help you increase that number.
Depending on your business’s industry, different goals may be more relevant than others. Companies that focus on recurring revenues, such as insurance agencies and financial advisers, might have more success with a revenue goal based on their existing customer base.
Evaluate Your Options
When deciding on selling your business, several things need to be considered before you move forward. Whether it is the timing of the sale, the type of buyer you choose, or the legal considerations involved, a well-planned exit will make your life easier and help ensure you get the most out of your business.
First, you need to determine your reason for selling. It will help you answer questions from potential buyers and other stakeholders. It also will allow you to decide whether you have the right people in place, such as your family or other trusted advisors, to lead your company through this transition.
Another important thing to consider is the value of your business. It will not only help you decide the right time to sell, but it will also determine how much you should expect to receive for your business. It is best to sell a business that is in good condition and has been growing steadily.
Determine the Value of Your Business
Whether you are considering selling your business for a profit or as part of an estate sale, knowing your business’s value is crucial. The right valuation can help you secure the funds you need and prepare for the sale of your company. It can also help you determine the right price to sell your business at, making navigating the process easier.
The first step to determining the value of your business is to take inventory of its assets and liabilities. You can use a financial calculator or work with a professional to develop a list of the assets that make up your company. Then, tally the value of each item, subtracting any debts or liabilities.
Once you have a complete list of your assets, start determining their worth using one of the three main approaches: the market approach, income approach, or earnings multiplier. The first approach uses similar companies in your industry that operate similarly and have comparable assets.
The second approach takes the income metric of your company, such as revenue or earnings, and assigns a multiple to it. The third method uses an industry multiplier to estimate your company’s value.
Prepare for the Sale
Preparing for the sale is a complex process that requires you to partner with advisers and stay involved during the transition. You may need to hire a business broker, investment banker, valuation expert, accountant, tax advisor, and transaction/M&A attorney for you and the buyer.
In addition, you should think about how to keep your employees happy. It includes keeping the company culture intact, ensuring your current employees are comfortable with the change of ownership, and that they will have opportunities to advance with the new owner.
In addition, if you sell products or services, your inventory is another important business component. Having an unaccounted inventory can reduce the value of your business and cause you to pay tax penalties.
To avoid these pitfalls, try to keep track of your inventory monthly. It will give you more control over your stock and allow you to maintain a proper inventory level at all times.
It’s also important to prepare for the sale well in advance, as this will allow you time to improve your financial records and other factors that can increase your business’s value.
Once you have a clear picture of your goals, you can work with your advisors to develop an exit strategy. It will guide you through the entire sale process and ensure your desired outcomes are met. You’ll also be able to identify the right people to contact and negotiate with, which can make the transaction go smoothly.
