You own a small business and are thinking of selling it. Before making your decision, it’s important to understand all that it entails and to do extensive research to help you determine if selling is the right thing to do.
First, you need to ask yourself why you are selling your small business. This answer will be the driving force in your decision.
A few reasons to sell a small business include:
- No longer having an interest in or passion for your business;
- It’s grown too large for you to keep up;
- Your brand hasn’t grown much and you’re losing money on it;
- You can earn a cash profit and need the money;
- You no longer have the time to spend promoting your brand and running a business on a daily basis.
There are myriad of other reasons, too, as to why you may want to sell your business.
Make a detailed list and spend a few weeks mulling it over. It’s a huge decision – and if you do decide to sell, the decision is final.
Is there ever a bad time to sell?
Once you’ve made your decision on whether or not to sell your small business, make sure it’s a good time to sell. Just like the housing market, business values go up and down with the market, as well. Would you sell your house if it were worth significantly less than you paid for it (assuming you can still pay your mortgage)? Probably not.
Before you sell, make sure you’ll earn a decent profit. After all, you put years and years of hard work into your business, so don’t just give it away for nothing!
What you need to know about selling your small business
Selling a small business takes time. In fact, it can take years to close a deal. Don’t just assume that the second you put your business up for sale that someone’s going to come knocking on your door to buy it. You’ll need to get a business appraiser to determine the worth of your business. This value will help you gauge what you should list your business for.
Once appraised, you’ll need to gather four years of financial documents – including taxes, equipment, sales transactions and current leasing information.
You’ll also want to have an operating manual to give to your buyer in order to help make the transition run smoother. Gathering all of this information can take time, so again allow yourself plenty of time to get everything gathered to help ensure accuracy.
Common mistakes people make when selling a business
Learn from others. Common mistakes that are made when selling a small business include:
- Going with the first potential buyer that comes your way. Don’t always go with the first – do your research and make sure the buyer is ultimately the best person to take over your business.
- Letting the broker do all the work. As the owner of the business, you know your business and your industry the best. Be willing to promote yourself and do some of the legwork to get your business sold.
- Not being willing to negotiate. Remember, the asking price is just that – it’s what you’re asking for. It’s not necessarily what you’re going to get. Be willing to be flexible, but make sure not to give your business away, either.
All in all, selling a small business takes time and work. Make sure selling is what you really want to do, and then take a look at the current market. Do your research, plan ahead and be willing to put in the effort to ensure that your business is in good hands, even after you leave.
About the Author
Sarah Brooks is a freelance writer living in Glendale, AZ with her husband and daughter. She writes for sites such as Reputation, covering a wide variety of topics from small businesses to food and nutrition.