How to sell your business
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Whether it’s because you want to retire or move on to other challenges, selling your business is one of the most important decisions you will make as an entrepreneur.
The first thing you should do to sell your business is consult an accountant and a lawyer regarding the tax and estate planning implications of the sale.
Next, you’ll want to take the appropriate steps to increase your business’s value and maximize its sale price.
Finally, you’ll want to find a lawyer or consultant who specializes in mergers and acquisitions to advise you on the right steps throughout the sale process.
The right way to sell your business
There are several ways to sell a business.
- Using business brokers
- Canvassing competitors
- Contacting industry consolidators
- Presenting yourself as a potential acquisition target
Each requires differing amounts of involvement from the business owner.
One thing to keep in mind when considering the sale of your business is timing. As with most sale situations, if you’re in a hurry, you may not realize the return you want.
Just as is the case with selling a house, the time you take to improve the property will pay off in a higher sale price.
Think like a buyer
One way to improve the "property" is to put yourself in the buyer’s place. Recognize what he or she will be looking for and then shape your business to fit those needs and desires. Usually, buyers of businesses are concerned with the following:
- A fair business valuation, which can be determined through several different accounting methods, such as comparable transactions or discounted cash flow.
- Financing mechanisms to buy the business, such as share swaps or vendor financing.
- Risk factors, which are elements of investigation that go into any investment. Keep in mind that buyers are really investors. These factors could include growth potential, industry conditions, liabilities, operational problems and so on.
- Integration of the new owners into the existing business.
Finding a buyer
To find a buyer, most sellers first put out the word through their circle of acquaintances within the industry and consult advisors such as accountants and lawyers, who often keep an eye out for businesses that are for sale. They may also advise industry associations and business brokers that they are interested in selling.