How to Sell a Business: Positioning and Avoiding Common Mistakes

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How to Sell a business, positioning it well and avoiding mistakes.

Are you thinking of selling your company and want to know how to sell a business?

Selling a business, whether small, medium or large is a complex undertaking. As such, you must approach this endeavor with great care and with the assistance of suitably qualified M&A professionals.

In this post, we discuss six steps that will help you create a solid plan of how to sell your business.

Step 1: Determine Your Motives for the Business Sale

Why are you selling your business? What’s your motive? Any serious buyer will want to know the motivation behind your divestment.

People sell their businesses for many reasons but the most common grounds are:

  • Selling has always been their intended exit strategy
  • They are ready to retire and hand over the reins
  • They are no longer passionate about running the business
  • The business is too big now and they can’t sustain the hours
  • Divorce, illness, or death

The worst rationale you can give for selling is because the business is no longer profitable and it is in distress. If this is the case, it might be better to try and get the business into a better state before attempting to put it on the market.

Step 2: Consider When You Want to Sell the Business

When most people ask how to sell a business, they are almost always ready to sell immediately. However, selling a business isn’t something to be done on a whim or impromptu.

You want the best possible deal after all. Therefore, this warrants taking time – at least a year – of diligent preparation.

You’ve got to get your financial and legal documentation in order. As well as make any improvements to the business such as repairing broken equipment, fine-tuning operating systems, and growing your customer base so the business is attractive to potential buyers.

Step 3: Get the Business Appraised

How much is your business worth? Most business owners, especially those who built their company from the ground up, often have an inflated view of their business’ worth.

During business valuation, an experienced appraiser will conduct an in-depth examination of your operations, assets, sales, and management while factoring in market conditions to give you an estimated value of your business. This is the ball-park figure you can use as your listing price.

Step 4: What Documents Do You Need to Sell a Business?

From letters of intent, tax returns, business certificates, NDAs, to escrow agreements, the required documents are numerous.

Thankfully, we’ve dedicated a whole blog to answering this question and recommend you check it out here. In the post, you’ll find a checklist of the legal and financial documents needed to sell your business.

Plus, you’ll also learn about who drafts the documents and the role the documents play during the selling process.

Step 5: Starting Your Search For a Buyer

Most people who want to learn how to sell a business jump to this section first! Where are the buyers? Where do you find them?

Let’s begin by acknowledging that finding a buyer takes skill, perseverance, and great patience. There is no ‘buyer watering hole’ where they gather. Buyers come from disparate places. You have to be versatile in your search. Proficient brokers such as those at Sun Acquisitions have the necessary expertise and competence to help you identify and engage prospective buyers.

With that said, it’s also good to be aware that perseverance and endurance are required on your part as selling a business can take a while. Recent studies suggest that it can take anywhere from eight to ten months to sell your small business.

It’s also worthwhile to keep in mind the following stats:

  • 90% of buyers who start a search to buy a business never complete the transaction
  • 50% of all business for sale transactions expire during the due diligence process
  • Only 20% of companies with a listing price of under $1 million ever sell
  • Fewer than 1 in 3 companies listed with a $2, 5 million-selling price ever sell

As you can see, you’ll need all the help you can get to connect with serious financially qualified buyers. And that’s where having a good business broker in your corner will work in your favor.

Step 6: To Hire M&A Professionals or Not?

Unless you’re familiar with the intricacies and nuances of brokering, business law, and financing, it’s in your best interests to work with an M&A broker, M&A attorney, and M&A accountant.

Brokers in particular can help you understand how to sell a business and get it ready for sale. They will assist with negotiating the best deal for you as well. They can also introduce you to buyers through their rich network and contacts.

Thankfully, you don’t have to look far. Our expert Sun Acquisitions team is ready to offer assistance as you prepare to sell your business.

Discuss buying/selling a business with our M&A consultants, contact us today.

Looking for more insight on selling a business? Check out these links:

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

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