Did you know that in 1978 it only took 57 days to sell a business? Compare that to today, when you’ll see three out of four businesses NEVER sell, and the average time to sell is almost a year.
There are ways that you can more effectively sell your business. This article outlines a 5-phase strategy for selling a business more easily and with less hassle.
The Upfront Work
You’ll see below that what you do before you start to sell a business is as critical as what you do once you put your business on the market. Preparation is critical to successfully selling a business, as is having a clear and concise process. A good business broker will understand this, and won’t have you sign a contract until you fully understand how businesses get sold today.
Phase I – The First Meeting
Those business owners who take the time to do all the preparatory work of selling a business stand a much greater chance of actually selling, and will sell for more money with better terms.
In the first meeting, your business broker and you will discuss your financial history, your employees, and your market. He’ll try to understand where you’re strong in the market, and where your competition is stronger. Ideally, he’ll already know your market, perhaps better than you.
The goal of the initial meeting is to see what you need to do to make your business attractive to buyers. It’s a waste of your time (and money) to just sign up with a broker because he says he’ll get your asking price. Remember that 3 out of 4 businesses don’t sell because they’re not in a position to sell.
Your broker should give you an honest assessment, and let you know if you need to go back and add value to your business before proceeding.
Once you’re ready, you’ll move to Phase II.
Phase II – Learn More, Do Research, and Add Value
Phase II is where your business broker starts to take over. He or she will do a tremendous amount of research, including analyzing five years of your financial records. He’ll perform a financial recast for you, research what has recently sold in your area or market, and then hand you a short list of specific ways that you can add value to your business before putting it on the market.
This phase is crucial to your success. You’ll take the time to “recast” your financials into reports that are easily digested by potential buyers and their banks. You’ll want to put all your financial records in terms that enable them to quickly see if the business will give them the profit and income they want.