Want to know how to sell a business?

Over the past few years, the number of small businesses sold every has steadily increased. It can be incredibly lucrative; however, not knowing how to sell a small business could see you making some critical financial errors.

So how do you avoid being ripped off by a buyer? How do you sell your company for its worth? How do you sell your company the right way?

Well, if you keep reading, you’ll learn the simple steps to sell a company the right way!

1. Hire a Valuation Expert

To sell your company, you need to first determine its value. When pricing your business, you can normally expect to value it three to six times your current revenue.

Although that’s not set in stone, it’s a fantastic place to start. And this initial figure can give you a ballpark to begin negotiations.

A valuation expert will give you a far more precise figure based on company sales, revenue, outstanding invoices, or if you have any debts against the company.

It’s also inevitable to have hard negotiations and potential having buyers questioning the value you have set. Having a non-biased third-party evaluator will prove to the buyer that the value is fair based on market conditions.

2. Have an Exit Strategy

Before you start a business, you should always have an exit strategy in place should you want to sell the company in the future. Your exit strategy will give you a step-by-step plan of how you would sell.

Selling a company is a big deal, so having a structured plan to go about it is critical. Your exit strategy should always include a succession plan for the day-to-day running of the business should you sell.

Your exit plan should cover any potential risks and show you how to correctly manage them and how much you need to make from the deal to make it worth your time.

3. Understanding Buyers

You must understand that not all buyers are made equal. There will be a few suspicious buyers who are either looking to lower the value of your company to get a better deal or just wasting your time.

You need to do a lot of research on the individuals behind each offer being made. Your business is your baby, and you want to ensure it’s going into good hands and someone trustworthy and serious about the purchase.

One way to protect your business and the details of the sales is with a non-disclosure agreement. Non-disclosure agreements stop buyers and sellers from exposing sensitive information and using it against one another.

When debating using a non-disclosure agreement, it would be advised to seek legal professionals to initiate the agreement and help keep sensitive documents secret.

4. Find a Business Broker

A professional business broker can help you through each step of the process of selling your business. A broker will also work on your behalf to get your the very best deal possible when selling your business.

There are a lot of steps to selling your business. Thankfully, your business broker will take care of all the small and big details, relieving a lot of your stress.

They will evaluate your business and route around the marketplace to find prospective buyers for your company.

Understandably, business brokers are not always a cheap investment. It can often cost you between 5% to 10% of the sale of your business to hire one, which is fine if you are happy losing some of the profit from the sale.

5. Have Contracts and Lawyers In Place

It sounds obvious, but you should have contracts and lawyers in place when you are looking to sell your company. This is even more important when you have a non-disclosure agreement in place.

A lawyer will help you create a draft sales contract to help you avoid any potential legal issues that leave you vulnerable.

Even if you already have a lawyer working for your company, it is always worth getting a second opinion to make sure that everything is being covered and no potentially damning mistakes are being made.

6. Get Your Money Upfront

When you’ve got everything in place, and a buyer is ready, it’s time to proceed with the sale. It is important to ensure an agreement is in place that sees you are paid upfront as part of the deal.

There are several reasons why getting the money upfront is important:

  1. It allows you to walk away from the company as per your exit plan
  2. It helps pay for associates costs and fees
  3. It shows you the buyer has the money required to fulfill the deal

Not receiving your money upfront can cause a lot of issues for you as the seller. The biggest issue of all is not receiving the full amount agreed in the contract.

Allowing the buyer to pay in installments leaves you open to any potential financial vulnerabilities the buyer might run into. These financial issues can cause you to not receive the full amount of money.

Get Help to Sell A Company Today

Now that you know the tips for selling a business, you can start the process of getting your business prepared and finding yourself a buyer.

It requires a lot of individual steps and details to sell a company, and it can be overwhelming at best. So make sure you prepare in advance and get the help of a business broker to help simplify the process for you.

Interested in selling your business? Check out our services for business sellers today.