Selling a business is an emotional process – there’s a certain amount of joy and relief that comes with the process, but there is also plenty of stress and challenges. Knowing how to approach the challenge from the correct angle will ensure everything unfolds smoothly. Here are a few helpful tips and tricks:
1. Determine What Your Business is Worth
You can’t begin to sell your business if you don’t have an idea of what it’s worth. And as you price it out, be sure to avoid these common mistakes:
- Mistake #1: Overpricing your business because of your emotional attachment. Your business is not sentimental to the buyer, and they won’t pay you a premium because it’s your “baby.” All they see are dollar signs, numbers, and potential.
- Mistake #2: Underpricing your business because you’re burned out and just want to be done. It’s worth taking the extra weeks or months to do it right. It’ll wear you out but could mean a five-, six-, or even seven-figure difference in the final sale price.
The final sale price for your business will ultimately depend on buyer-side demand. However, by avoiding the mistake of significantly overpricing or underpricing, you avoid scaring off the right buyers.
2. Clean Up and Get Organized
Clean up your finances and get organized. This includes balancing your books, getting all accounts aligned properly, and shoring up any loose ends or “holes” where money is bleeding out of business.
A disorganized business is a challenge to sell. Buyers want to know that your business is being run appropriately and that every dollar, transaction, expense, and investment can be accounted for. If there’s a lot of “slop” in the numbers, that becomes a problem.
3. Partner With the Right Business Broker
Trying to sell your business on your own can be a nightmare. There are hundreds of little tasks that must be completed, and you don’t have the time or expertise to work them all out. This is where partnering with a good business broker comes into play.
When choosing a business broker, there are a few variables to consider. One of the most important is the idea of specialization. There’s a huge advantage that comes from working with brokers who specialize in your specific niche. Niche brokers understand your business model, proper valuations, what factors buyers are looking for, etc. This allows them to help you formulate better positioning within the marketplace.
For example, if you own a FedEx route that you want to sell, KR Capital is the go-to option. They’re a leading FedEx brokerage firm that’s sold more than $150 million worth of FedEx routes. Now contrast that with a general business broker that’s sold a couple of routes over the years. Which one would you be most comfortable working with?
4. Negotiate Effectively
You might think you’re a pretty seasoned negotiator, but negotiating the sale of a business is unlike anything you’ve done before. It’s a long and arduous process that requires an extremely strong stomach. The best piece of advice is to identify what you’re worth and then let your business broker handle all of the interactions and negotiations with interested buyers. This takes your emotions out of it and typically leads to better results.
(As a side note, most businesses will sell for somewhere between 5x-10x EBITDA (which is a standardized profit margin measurement). If someone is trying to give you 2x-3x EBITDA, then this is a pretty good sign that they’re off the mark. Stick to your guns, and don’t let a lowball initial offer throw you off. You know what your business is worth – patiently wait for the right offer and negotiate from there.)
Always Operate From a Seller’s Mindset
The process of selling a business is unique and unpredictable. Every situation has dozens of independent variables in play, making it somewhat difficult to zero in on a singular formula or strategy. But one thing is for sure: The more prepared you are for a transaction on the front end, the more smooth and efficient it’ll be on the back end.
As a general rule of thumb, always run your business like it’s for sale. In other words, stay organized, establish standardized processes, and teach your team how to operate without you. When you take this approach, you’re in a much better position to sell when the time is right.
Intentionality is at the heart of running any successful business. By approaching operations, management, and leadership with a “for sale” mentality, you force yourself to prioritize the right aspects of the business. Good luck!
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