Prepare for Selling your Business

3 Tips to Prepare for Selling your Business

Jun 8, 2016

You’ve decided to sell your business. Why? That’s one of the first questions a potential buyer will ask you. You must have a definitive answer for the buyers. However what about your questions, about sell your business.

Entrepreneurs may be relentless in their pursuit of the American dream, but at some point in life it may be time to move onto another venture.  Whether you own a small service-oriented business or a multi-location retail operation, putting your business up for sale can be a very stressful time.

The most commonly asked questions by those selling their business are about how to determine a value for the business, factoring in your bottom line.  Researching similar businesses in our free online Businesses FSBO directory may help you determine the best formula for valuing and selling your business. You can compare your business to others like businesses that are For Sale By Owner. Selling the business yourself allows you to save money and avoid paying a broker’s commission.

Valuing your Business for Sale

Determining the actual worth of a business can be quite complicated.  However, sale prices are usually based more on profits than on anything else.  In other words, the sale price is almost always a multiple of the company’s profit.  People looking at businesses for sale are usually quite savvy financially.  If you are selling a small business with no more than 25 employees, most buyers will be individuals who are planning to make a living from the business.  They will want the hard numbers to determine what their R.O.I (return on investment) will be on your business.

Make Your Business “Saleable”

Plan on recasting your financials to determine the value of the business before listing it in a “Businesses for Sale by Owner Directory.”  Rather than using the numbers shown on tax returns, a financial statement should reflect the businesses’ value in the most positive and accurate light possible.  This may mean recasting profit-and-loss statements to adjust for what the owner gets out of the business, including salary, benefits and automobile expenses etc. Remember buyers want to know the financial history of the business, but buy the future of the business. Be sure to show the buyer how the business can grow in sales and profit. Prepare for the sale as early as possible, preferably a year or two ahead of time.

Don’t Plan on a Cash Sale

Many small businesses are financed by the seller.  In fact, you could find yourself lending up to 70% of the actual purchase price to the new owner.  While these deals vary greatly, some buyers and owners settle on a payoff period of 4-5 years.  Be prepared to get as much information as possible on the buyer’s financial background as the buyer gets from you on the business’s history.

Selling your business online is easy with an online our Businesses for Sale by Owner Directory.  This will put your business in front of a large audience of potential buyers.