You have decided to move on from your business, but the next logical question you should ask yourself is: Is My Business Ready for Sale? Will you likely find buyers to take over your company and they will pay the best price to acquire it? Let’s find that out.
Is My Business Ready for Sale? Ask These 5 Questions
We hope you have convinced yourself emotionally about the sale to a new owner. This is the first step when preparing to sell your business. Maybe because you want to retire or start with something new, or you had a burnout with this one.
However, not all businesses are perfect for acquisition, and yours is not the only one available for sale in the market. A buyer has many options and like you, they want the best. Is your business that good?
We have curated a list of 5 questions to help you with this analysis. Take your time and think through it, you will know whether your business is ready for sale.
Questions 1. Are your Financials Solid?
The main data buyers inspect in a company, whether acquisition or investment, is how well the business makes money. This includes Revenue, Profit, Net Margin, Cash Flow, Assets, and Liabilities.
Your revenue (Sales) should be more than $10,000 for the buyer to consider. Profit is also necessary as no one wants to purchase a loss-making business today. Your valuation is also dependent on them.
Buyers first focus on yearly and monthly records of both Revenue and Profit. You don’t want to make a bad first impression. So, to enhance your listing, do these 2 things:
- Try new marketing and traffic channels to increase your revenue.
- Increase your net margin by cutting unnecessary costs.
This can showcase potential for growth in the future. ARR (Annual Recurring Rate) is another key metric when examining SaaS companies.
One important number that Buyers don’t like is Debt. If your business has any loans, try to reduce them or pay them before putting the ‘to let’ board on your venture.
Now, you must organize and present all the financial statements at negotiations. Here are the documents:
- P&L (Profit & Loss) statement for the last 3 years
- Balance Sheet
- Tax Returns
If the records are not clean and up-to-date, the deal will fall at the last moment. So, we recommend hiring a financial advisor or accountant to audit the statements.
Also, we advise you to check the business’ worth beforehand to know what you can expect from the sale.
Question 2. Is Your Business Growing?
No one wants to travel in a sinking ship! If your revenue and profit are consistently growing or stable, it’s a green light. If sales are declining, it will sway someone to invest.
The most important trend buyers look at nowadays is the sales for the previous 3 months. We recommend selling the business after the high-sales months. So, try new traffic channels, or increase marketing dollars in the next months to add more sales. Now is the time to start SEO or Social Media marketing if you have never done so.
Cutting down on costs can also help. Eliminate products that are not selling well, hire freelancers for small gigs, renegotiate with manufacturers or suppliers, and avoid stacking up inventory for a long time. You will have a better bottom line.
Question 3. Do You Have Processes in Place?
A smooth-running business is a goldmine, especially if it is not completely dependent on you. Buyers love a turnkey business where they can start the operations and keep the sales flowing from day one.
So, start delegating your work to your employees, or if you work alone, start documenting all the operations. This will show how operationally efficient this business will be after the purchase. If the buyer thinks there is no need to reinvent the wheel, they will be more inclined.
Next, talk to your employees during the decision process. If they have no problem with having a new owner, that is also a plus point for the buyers.
The usage of AI tools among entrepreneurs is also growing, whether it’s for content creation, accounting, or customer service. A report by the US Chamber of Commerce found that 98% of small businesses are using a tool enabled by AI. So, you can exhibit how certain tasks can be completed using AI to assist the new owner after the transition.
Question 4. What’s Your Value Proposition?
You know your business is great but it’s also necessary to show it to the potential buyers. Create a presentation on the value proposition: what makes your business special? It could be a loyal customer base, strong branding, or unique products. Such unique attributes can give you an edge.
A buyer has so many options in front of them, so your listing should shine more. An articulated display of all the reasons to buy your business will work wonders. This can also include revenue forecasts, customer reviews, and how your industry will grow in the coming years.
However, the first thing the buyer will check is your website. To leave a great first impression, hire a UI/UX developer to improve your website design and highlight the value proposition on your homepage and About page.
Question 5. Have You Assessed the Market Conditions?
All the questions we mentioned above are based on the microeconomics of your business. Don’t forget about what’s happening on the macro level.
Selling during favorable economic conditions can significantly increase valuation. Look for signs like the stock market is in a bull run, your industry is trending among investors, or your competitor sold for a big amount.
Timing is everything! Sell at a good time and you can get a higher multiple. Consult an M&A (Mergers and Acquisitions) expert to decide the best time to sell.
We have seen business owners rush through the process and get less money than they deserve. You should not be one of them. Follow the process and be patient. Do you need more preparation to attract the best possible offer? If yes, get started today.
Takeaways
These 5 questions can tell you whether your business is ready for sale or whether you wait and make necessary changes before the sale. You are all set to sell the company when you can confidently demonstrate growing revenue, smooth operations, and a clear value proposition.
