If you’re thinking about selling your business, think twice. Selling a business should never be a spur of the moment decision. You need to think about the timing, what you need to do, your professional advice and many other issues…
So, should you sell your business? Here are 9 key questions to help you figure it out.
- Is my business ready to sell? You need to give yourself at least two years of preparation before putting your business on the market. Make sure you can produce two to three years of tax returns that are accurate and show maximum profitability to get the best price for your business. Owning a ‘lifestyle business” isn’t necessarily going to help you get the best price. Don’t make your business appear less profitable as it will ultimately affect the sale price.
- How is a buyer going to value my business? A number of factors will affect the value of your business. But the only true way to determine valuation is to get offers for your business. Ultimately, the business is only worth what someone is willing to pay. However, several factors influence the valuation: the company’s historic and forecasted financial performance; attractiveness of the sector (and the related market conditions); market position; the strength of the management team; the company asset base and possible synergies and cost savings the buyer is likely to derive.
- Who should be on my team when I sell? It’s important for business owners to figure out whose services will bring them through the sales process and help them get the best price for their business. Do you need an accountant? How about a sales agent, business broker or solicitor?
- Is it the right time to sell? Many people wait till their business is declining to sell. That’s the exact opposite of what you should do. Aim to sell when you are at you’re at your most profitable.
- Is the market right? Before selling, look at current market conditions for your industry and the wider economy.
- Can I cope with any economic uncertainty? Changing macroeconomic factors (Brexit? Presidential change in the US?) can prove too much for some business owners. Keep your eyes trained three or four years down the road, and if you don’t believe you can keep up, sell before you lose the ability to do so.
- Can my business thrive without me or without a key customer? If a buyer is concerned that a business is too dependent on the owner or a single customer, he may take his offer elsewhere. A good business can operate when the owner is on holiday and/or has good, diverse income stream, where no one customer represents more than five percent of the business.
- Would I be willing to stay on if the buyer wants me to? Sometimes you can seal a deal by agreeing to stay on in a consulting role for a period of six months. But first, you need to determine whether it’s really worth it to you. If you’re willing to stay on, it might reduce the risk to the buyer and increase the value of the company.
- What are the potential deal breakers? Unresolved issues can rear their ugly head and interfere with a sale, particularly in areas such as company ownership, accounting and intellectual property rights. Therefore, consider what your potential deal breakers are and try to resolve them before you’re near to closing a deal.