Putting your business for sale is hard! It’s difficult for anyone to let go of something they built and worked on for years. But it’s equally important to do the last job right: preparing to sell your business to make a successful and profitable exit.
7 Tips for Preparing Your Business for Sale
Preparing your business for sale looks like a ton of work and you don’t know where to begin. Don’t worry! Follow the tips below one by one and your business will be ready for sale.
You can perform the tasks given below in the same order we provided to complete the whole process quickly.
1) Prepare Yourself First: Why are you selling?
You are already doing the work daily to manage your business and now you have put some time aside for selling your business. It can be stressful and emotional. Procrastination will lead to doubts about why you are doing all this. So, first, you need to explain to yourself: Why are you selling the business? & What will you do after the sale?
The moment you answer this (and write it down as well), you have a start and an endpoint. The reason for selling might be burnout or you want to switch to a new business or just retire. Every answer is understandable. Once you begin with clarity, you will never have second thoughts.
After that, planning your next adventure will bring new motivation to complete the whole process as soon as possible.
2) Maximise Your Valuation
The primary goal for the seller should be to get the most money for their business. So first, use a Business Valuation Calculator to find out its worth. Revenue and Profit are the key numbers, but these other factors can significantly affect the value:
- Profit Growth Rate in the last 3 years
- Sales Trends in the last 3 Months
- Diversity in Traffic Sources
- Customer Demographics
- Social Media Presence
- Growth Potential
To increase valuation, make minor changes in the last months before the sale. You can create an e-mail list of customers, try paid ads, brainstorm new ideas, hire an SEO expert, increase your social media presence, etc. Anything that shows the buyer that the business still has a lot of gas left in the tank.
Identify a key selling point to attract more buyers. It can be your profit margin, loyal customer base, more organic traffic, or any competitive advantage you have. Also, highlight the growth opportunities in the industry and upcoming trends that can boost your sales in the next 2-3 years. These two things will make a perfect sales package.
However, if profit or sales decreased in the last few months but you have a solid reason, just write it down. Every business faces challenges and they can be fixed. Explain to the buyer during the deal and it will not affect the valuation.
3) Get Your Books In Order
When you list your business on an online marketplace or broker, they will ask for two things: a P&L (Profit and Loss) statement and access to the linked Google Analytics account. This will tell the buyers how much money the business makes and where the customers come from.
But before the buyer acquires your business, they will verify all the financial and legal records once. For a smooth due diligence process, collect the following docs and put them in a folder:
- P&L (Profit and Loss) statement
- Balance Sheet
- Cash Flow Statement
- Tax Receipts
- Access to Google Analytics account
- Access to Google Search Console account
- Agreement with Supplier or Manufacturer
- Business Licenses
- Legal Permits
- Employee Details
- Assets Report
- Copyright and Trademarks Registration
- Other Intellectual Property (IP) to be included in the deal
*Some other documents might be required according to your country or business domain.
Once you have all these documents (both hard and soft copies), the negotiations and transfer process will take less time. We have seen deals fall off because the seller didn’t bring the right document to the buyer at the table.
It will take some time, and many calls with your accountant or auditor, to arrange, so we recommend starting this step immediately when preparing to sell your business.
One thing that buyers hate is Debt. So, before listing your business for sale, try to manage or reduce debt in the upcoming months, even if it dents your profit for a short time.
4) Smoothen Your Operations
Business is like a machine with a lot of moving components. So, document how everything works. For example, if you are an e-commerce store, jot down how you receive the product, how you list it on the website, how you deliver it, which employees do what, etc. Simplify the process to remove inefficiencies.
One common reason buyers leave the deal is if the business can’t function without you. Owner dependency creates issues. So, start delegating your work or find a leader among your employees.
You can even look for any cutting down unnecessary costs to make the business look more attractive. You can implement tech solutions to automate certain tasks or adapt lean management.
An easy way will be to start separating your personal expenses from the business income. For example, if you want to order food during office break, order it with your card and not the business card.
5) Create a Transfer Plan
Transferring your business to the new owner will be done after the deal. We told you what you need to provide them but the next question is how? The transfer process can be complicated, so make yourself aware of it.
Keep a folder to collect all the documents in one place. Note the login credentials for key accounts, such as hosting, domain, third-party tools, e-mails, etc. Ask your developer how they will transfer the website to the new owner. Do a meeting with your employees to share why you are doing this. Finally, create a rough idea with all these tasks outlined on how the transfer will happen to avoid chaos later.
6) Look for Buyers
Now, it’s finally time to put your business on sale. But where? There are many online marketplaces (like Ecomswap) or brokers that will help you find potential buyers. You just have to fill out the form on their websites to list your business. But this is not that simple.
The problem you might face is that you will not receive any interest in your business listing and/or scammers start contacting you. So, we recommend only partnering with trustable marketplaces. Still comes another problem. Sellers had to wait for months to get a deal done. But we have found a solution.
At Ecomswap, we only work with Qualified Buyers to speed up the process. We check in advance whether they have money in their bank account and they are willing to acquire a business. This way, a seller like you will start receiving requests from only verified buyers within a few days.
An online marketplace will assist you with valuation, negotiation, and post-sale transition.
Some people also try to find buyers themselves, but that is just going to make things hard for you. While it will give you full control, you will have limited reach without a broker resulting in getting less value for your business.
7) Negotiate with Confidence
All the above steps will ultimately lead to a meeting with a buyer for negotiations. But because of all the above work, you might be exhausted and might lose the price you deserve. So, start preparing for the deal today.
Learn about the different deal structures in the industry, and the terms & conditions of the sale agreement, prepare the best answers for the common questions a buyer asks, provide a list of new ideas that the new owner can implement, and learn some common negotiation tactics.
You can hire a lawyer or financial advisor to be your ally during such meetings.
It is also now common to have a Letter of Intent (LOI) in place before the final deal.
Takeaways
Now you are ready! We have curated a roadmap for you to prepare your business for sale. Stick to it and you will get the best price. Some of these steps will also help when you are passing the company to the next generation.
And when you sell it, the best thing to do is celebrate it with your family and friends. You might also try to go on a small vacation before you move forward to your next journey.
