How to Sell a Business – Steps To Make a Profit

Business owners sell for many reasons and somehow, these reasons correlate with the possible outcome of the business sale.  For the most part, reasons are personal such as retirement, health issues, partnership problems, relocation, being burned out and still others who just find that there is another more profitable or challenging venture.  Whatever the reason is most people who sell a business wishes to sell at a profit – the bigger the better, of course. 

Step 1.  Determine the value of your business.  Knowing how much the business is worth is a good starting point.  It will also give you an idea if you can sell a business as it is or if you can make changes to improve the value. You will need an accountant and a financial adviser.

Step 2. Prepare for the sale. Based on the valuation and advice, start cleaning house.  Do the necessary improvements from operations, structure, and financials. Prepare documents – bank statements, financial statements, client lists, supplier lists, inventory lists, lease documents etc.  It is a good idea to bank all sales to boost cash flow profile even if it means you pay higher taxes.  Higher verifiable profits add value to the business.

Step 3.  Put together long term business plan that includes a marketing plan.  When you sell a business, you need to present a profitable future for it.  It gives prospective buyers and their investors a positive perspective.  Remember that they do not value your business the way you do.  You may be proud of where it has been and its performance means a lot to you while buyers put weight on its potential profitable future.

Step 4.  Choose a business broker with a marketing plan.  Do check credentials and referrals, however, when interviewing for the right business broker it is important that the business broker is able to present his marketing strategies and timeline.  Ask how he will be able to ensure confidentiality and at the same time advertise the business to the right buyer. Inquire how long it usually takes him to sell a business.

Step 5. Choose your buyer well.  Your choice will depend on what your goal is. Is it profit or the assurance that your business will continue as you wish it to?

Step 6. Be prepared for the sale.  When you sell a business, be emotionally ready too. Work out the possible negotiation issues with your business broker, lawyer and financial advisor.  Aim for a smooth exchange of ownership.