Category: Selling a Business

Selling a business is a major challenge for entrepreneurs. Besides the complexity of the process and emotions involved, entrepreneurs need to make sure they maximize the value of the business they’ve put so much effort and time into building.

Making cosmetic changes to a company at the last minute before putting it on the market is a recipe for disappointment.

Planning and preparation for a transition is the way to go and entrepreneurs need to take the time to do it right.

1. Seek advice

You should work with an experienced outside advisor who can help you prepare your business for sale, including having an expert valuation conducted.

Selling your business is one of the most important moments in your life as an entrepreneur. Professional advice will help ensure you get it right.

2. Work to boost your profits

Don’t expect high offers if you’re only breaking even.

You also don’t want to take too much money out of the business. Good retained earnings on your balance sheet—the portion of the net income that hasn’t been distributed to the shareholders—indicates to buyers that the business has been profitable and is healthy.

3. Increase sales and lower expenses

Analyse your processes and look for ways to increase operational efficiency, cut costs and control inventory without affecting your operations. Brush up your marketing plan and find ways of boosting sales including tapping new markets or offering new products and services.

Focus on creating a diversified customer base that, ideally, generates recurring revenues.

4. Continue to invest and improve

One of the biggest mistakes business owners make is to take their foot off the accelerator after deciding to exit.

The moment you stop investing in new equipment, maintenance and process improvements is the moment you start reducing the future value of your company.

5. Create a strategic plan

A formal plan that presents measurable goals and milestones for the coming years will give your business credibility as a growing concern with long-term potential.

6. Develop repeatable processes and empower your people

The processes in your business need to be repeatable and teachable, advises John Warrilow in his book Built to Sell: Creating a Business That Can Thrive Without You. “If your business can’t function without you, you will have a hard time finding a buyer,” Warrillow says.

Also, train, motivate and empower your people. Pay particular attention to the management team. Work to solve any internal conflicts and strive to keep employee turnover rate low. A strong, professional team adds value to the business—especially in companies with few tangible assets.

7. Stand out from the crowd

In many ways, selling your company is a marketing challenge of its own. That’s why it’s important to showcase to potential buyers whatever differentiates your product or service from the competition. Ask some of your long-time clients for testimonials explaining why they are doing business with you and what keeps them coming back.

Regardless to whether you actually go through with a sale, these tips will help you build a stronger, more efficient and valuable company.




By AllBusiness Editors | In: Buying a Business

  • Selling a business takes both careful preparation and the ability to handle a complex transaction — with the help of an attorney, of course. Since most business owners are not experienced in selling a business, they will make mistakes along the way. Here are 10 of the most common mistakes to avoid:

    1. Not learning the ropes. Like anything you do in business, there will be a learning curve when it comes to selling a business. Learn the terminology and how the selling process typically proceeds so that you can structure the deal properly and come out a winner.
    2. Setting a price too soon. You set yourself at an immediate disadvantage if you state a price without knowing the potential value of the business. Do not sell yourself short by setting a price too quickly. Assess the value of your business very carefully with your accountant or financial advisor and your attorney, and then set a price. Remember, you can always come down, but you generally cannot go up once you have determined your selling price.
    3. Selling too quickly. Unless you have to sell the business quickly for financial or personal reasons, you should not rush to a sale without exploring all of your options to determine whether or not you are getting a fair value for your business.
    4. Lack of confidentiality during the sales process. Once word gets out that the business is being sold employees may leave, vendors may hold back on deals, and customers may head to your competitors. The value of your business can drop quickly if you do not maintain confidentialityNot increasing the value. Owners who know well in advance that they want to sell the business have time to build up the value and make it more attractive to buyers.
    5. Not increasing the value. Owners who know well in advance that they want to sell the business have time to build up the value and make it more attractive to buyers.
    6. Not identifying the best buyers. You need to spend time on serious buyers only. If a potential buyer is not pre-qualified or does not appear to be prepared to make an offer, you may very likely be wasting your time. Do not spend time with the wrong buyers.
    7. Being unprepared to defend your valuation. If you have worked hard to create a value for your business, you should be prepared to defend and substantiate that value. Prepare backup materials to defend the value of your business.
    8. Failing to negotiate. How much leverage you have may depend largely on how many potential buyers are out there. Nonetheless, you need to be prepared to negotiate, and for this reason you should have professional guidance when you sell a business.
    9. Waiting too long to sell. Many business owners regret not selling at the most opportune time. By waiting, they subsequently encounter increased competition or have a product that has declined in value because of economic conditions. If you are thinking of selling, pay attention to changes in the economy and to the state of your industry, and look for the best selling opportunity.
    10. Not using the skills of professionals. You should seek out sound business and legal advice from professionals who have been involved with the sale of other similar businesses. Selling is a complicated process and not one that you should take on expert assistance.