7 Steps To Sell Your Business
Selling a business is a far different animal than it was several decades ago. Back then, you had a brick-and-mortar store with inventory. You probably had to advertise locally primarily to sell your business. Now, you could have digital stores, brick-and-mortar stores, and a mix of the two. You have far more options for selling this business too, as your potential customer base can originate from almost anywhere.
Finding a business broker with the knowledge of how to sell any kind of business is key to having success. Accurately valuing digital-only businesses can be especially challenging, as is finding the right buyer. We like Business Exits as the best business broker for helping you find the right sales price and for marketing your business successfully to maximize its value.
Crazy Egg’s Favorite Tools to Sell a Business
Although you can try to sell your small business yourself, tapping into the expertise of one of the best business brokers will almost certainly yield better results. In addition to providing advice on how to maximize the value of your small business, brokers often have a ready-made list of potential buyers. This can speed up the sales process, allowing you to move on to the next chapter in your life faster.
We recommend Business Exits for a fast turn around and fair terms. Pay $0 until your business is sold. Whether you are looking to sell tomorrow, six months, or a few years from now, the Business Exits team will work with you to secure the best possible sale.
Through our research, we found First Choice Business Brokers excels in determining the value of small businesses, no matter how niche your customer base may be. Reach out to FCBB for free.
Because Murphy Business Sales also provides business consulting services, this company has plenty of experts available who know how to boost the desirability of your small business. After you contact Murphy Business Sales for free to start the process, it routes you to a local office to dig into the specifics of selling your small business.
More Top Tools to Sell a Business
Through our research, we found several brokers that we rate as trustworthy and highly competent. Perhaps one of the brokers we listed here doesn’t quite seem like the perfect fit for you, or maybe you would like to learn more about them. Check out our entire list of the best business brokers, and you can read through the detailed reviews we made for each broker to find the best match.
Step 1 – Get Started With Business Exits
Starting the process of having Business Exits help you sell your company is relatively easy. They will want to know a few key details about your business, your goals, and your timeline. You can start filling out this information on their website.
Answer these questions to the best of your ability, and don’t worry if you have to dig a little to find the information you need. You want to give as accurate as possible information to your broker so they can help you start your sale on the right foot.
Bear in mind that you will be sharing sensitive information about your business in order to sell it. This is true no matter which broker you go with.
Confidentiality is something you should expect from any business broker at every step of the selling process. Business Exits, for example, will sign an NDA in order to guarantee the confidentiality of any information you share.
Step 2 – Determine the Market Value of Your Small Business
The next step is determining an appropriate value for your business. This is important because you don’t want to leave money on the table by valuing the business too low. And you don’t want to drive potential buyers away by pricing your small business too high.
Having a broker on your side is extremely helpful in this step. The broker has access to multiple tools to determine the business’ value properly. The broker also can study the current market in your area, determining whether your business’ value fits in well with the local market average. The broker may determine that the current market supports asking a higher price for your business than normal.
The broker can make further adjustments to the valuation of your business based on things learned during the interview.
- Growth: If you can show a steep growth curve is occurring, your business’ value may increase a bit versus what the actual sales numbers are showing.
- Inventory: If you are holding a smaller level of inventory than an average small business in your area of the market, you may end up with a smaller value on the business.
- Speed of sale: If you need to sell your small business quickly, the broker may suggest listing it at a lower price than its actual valuation to spark more interest from buyers.
- Maximum profit: If you must maximize the amount of profit, the broker may tell you to list the business at a higher price than its valuation so you have room to negotiate. Just understand that this technique may lengthen the time required to complete the sale.
Within 12 hours, Business Exits will tell you the kind of offers you can expect selling your company. This is a very fast turnaround time, so don’t expect this pace to be the norm.
Step 3 – Decide Whether to Sell Now
Once you receive a proposed valuation for your small business, you may decide that the number is too low. The broker may have some suggestions for you to try to improve the performance of the business, giving you a better chance at achieving a higher amount in a sale.
Even if you’re happy with the valuation, some additional planning can help you squeeze even more out of the deal.
That’s why it’s useful to work with a broker. Rather than looking at your business in a vacuum, they can help assess current and future market conditions. So waiting six months or a year could be worth it if you’re willing to wait.
If you’re not in a rush, some extra time can help you get everything in order. For example, if you don’t have detailed paperwork regarding sales and inventory amounts, this is a red flag for potential buyers. Your broker may even refuse to list your business for sale until you have a better system for providing financial information about your business’ performance.
You could also work with your broker over the next year to make sure your books are clean and you’ve eliminated all waste from your expenses.
Don’t let the broker’s valuation number offend you. Don’t take the advice you are receiving personally. Even if you don’t agree with everything the broker tells you, keep an open mind and be willing to try some new techniques to attempt to improve the salability and value of your small business.
Understand that some improvements to the business may only require a few weeks, while others can take several months. Be patient and thorough as you work to improve the performance of your business so you have the best chance at maximizing its value when you do sell.
But at the end of the day, the decision on when to sell is completely yours. Some of you might want to sell ASAP, even if the number isn’t what you hoped for.
Step 4 – Hire a Business Broker
Once you are ready to sell and you decide to hire a broker, you need to sign a listing agreement. This agreement should consist of a few pages.
An agreement that is too long may have some significant limitations and rules attached to it that might not be in your best interests. On the other hand, a short, one-page document may indicate a broker who doesn’t have a good understanding of the legal requirements of this type of agreement.
Items that the listing agreement should contain include:
- Length: Most listing agreements involve a six-month to one year contract period. If you try to break the contract early, you may have to pay a penalty, and the agreement should explain this. If you sell the business on your own after the contract period ends, you still may have to pay a commission if the listing agreement contains a tail clause.
- Commission: Most brokers do not charge you a set fee as part of the hiring process. Instead, the broker’s fee comes from a percentage of the final sale amount, which usually is around 10%.
- Upfront fees: You might have to pay a fee for any expenses the brokerage encounters while listing your property for sale. If the broker fails to sell the small business for you, you may still owe these expenses.
- Transaction value: Some brokers base the commission percentage on the full final sale price. Others may exclude certain items from the commission, such as the value of your inventory. Always fully understand the transaction value so there are no disagreements about the commission at the end.
- Special sales items: The sale of your small business may involve you providing financing to the buyer or receiving payouts in the future based on the earnings the buyer achieves. If you have an odd circumstance like this in your sale, make sure the listing agreement spells out how it affects the broker’s commission.
Considering the amount of money that is on the line with selling your small business, having an attorney review the listing agreement is a smart idea. The broker can explain everything in the agreement to you, but having your attorney look over the agreement is a good way to fully protect yourself.
Business Exits invites your attorney to review their broker agreement. It’s a very straightforward document that states the agreed asking price, and ensures that the seller does not pay Business Exits a single dollar until the business is sold.
Step 5 – Market Your Small Business
Once you sign the listing agreement, the broker can begin marketing your small business for sale. You should work with the broker during certain steps in this process, ensuring everything in the marketing materials is accurate.
This step isn’t quite the same as marketing your business to your target audience. You’re not necessarily marketing the company’s products, services, and value proposition. Instead, you’re trying to position it in a way that’s appealing to buyers and investors.
Having a deck, one-pager, and physical packet with the highlights can be useful. Make sure to include the following in your marketing materials:
- The sale price
- Address of the business
- Any photos of the business or inventory
- Historical sales records
- Lists of property and inventory the business owns
- A description of the business
- Projections for sales numbers and growth of the customer base
- Any help you promise to provide to the buyer after the sale
The broker may discuss with you the different locations in which the business listing will appear. Finding potential buyers may require spending a bit of money on advertising, and you may have to pay for these expenses up front.
Although you have the final say on the marketing of your small business for sale, listening to the ideas from the broker is a good idea. After all, you are hiring the broker because of his or her expertise. Some of the ideas may seem odd, or you may disagree with some of them, but it’s important to remember that the broker’s one job is to help you sell your business for the highest price the market will bear as quickly as possible.
You should also clean up any customer-facing or public listings of your business. While the buyer can obviously make any tweaks after the acquisition, it’s more appealing if everything is already in order.
For example, make sure your website is functional and has an updated design. If applicable, claim all of your business listings on third-party review sites.
You can even use reputation management software to help manage reviews and remove negative search results about your business from the web.
Step 6 – Negotiate With the Buyer
As potential buyers reach out about your small business listing, the broker fields all inquiries and questions for you. At some point, the broker may receive an offer to purchase your business from a potential buyer.
The broker should then reach out to you about the potential sale. Chances are high that the buyer initially makes an offer that is less than your requested sales price. The buyer may want to change some terms of the potential sale. The buyer also may have some questions about the sale. At this point, the two of you may need to meet to discuss some of these big-picture items.
You can ask the potential buyer to sign a non-disclosure agreement (NDA) before meeting them. Depending on the preferences of the parties involved, negotiations over the telephone, via video conferencing, or in person are possible. Your broker should be with you throughout these meetings.
Once you answer all the buyer’s questions and come to an agreement on general terms, your broker may take over the negotiating process about specifics on price. Once the broker has a firm offer in hand, the broker comes back to you for final approval. If you agree to everything the buyer is requesting, the broker can move forward with finalizing the sale.
Step 7 – Complete the Sale
After successful negotiations occur, the broker draws up the sales documents. You and the buyer can sign them separately, as there is no requirement to meet face-to-face again. You may want to have a lawyer look over the sales document for you before you sign.
Depending on the terms of the sale, the actual process of transferring ownership may take a few days to a few months. If you agree to help the buyer transition into owning the business, you may have involvement after the sale for several months. Explanations of these items should be part of the sales agreement that you and the buyer sign.
Typically, it’s in your best interest to stick around and make yourself available in case the new buyer has any questions down the road. Being open about your availability can make the buyer feel more comfortable, and it can be the cherry on top that pushes the deal through.
If you’re planning on selling another business in the future, this small touch can make a big difference. You don’t want to develop a reputation as someone who isn’t easy to work with, or it can cause problems for future acquisitions.
After the seller submits payment, the broker takes the commission from the payment amount, giving you the remainder. The broker should help you manage the timeline for transferring ownership of the business, even after receiving the commission.
That’s it! Now you’re ready to come up with a new business idea for your next venture.