How to Sell a Business

How to Sell a Business

You have built a successful business but now you think it might be time to retire or move onto other opportunities. That’s great because people are willing to pay a premium for well established, profitable businesses.  How long will it take to sell?  How much is it worth?  Which business broker should you use?  This article will address how to sell a business and get the best possible return on your investment in the quickest amount of time.

How to Sell a Business Step #1:  Assess Your Desire to Sell
Are you really ready to sell your business?  Why are you selling?  What specific plans do you have for what you will do after you sell your business?  It is important that you are committed to the sale’s process before you attempt to sell a business.   You should start planning at least two years ahead of your target date.

How to Sell a Business Step #2:  Get Your Business Ready to Sell
The best time to sell a business is when it is strong, healthy, and profitable.  Two years before you want to sell a business, you should start cleaning up your financials.  Cut all of the waste, keep your sales on an upward trend, and make sure that everything shows in your tax returns.  You might pay a little more in taxes, but you will get it back two-fold in a higher selling price when you sell your business.

How to Sell a Business Step #3:  Set Your Asking Price
What you have invested in the business or what you still owe on it are not factors that determine the market price of the business.  You can do some research on BusinessesForSale.com or BizBuySell.com to see the asking prices of similar businesses in your area.  Contacting nally business broker’s is highly recommended. They will deliver business brokers that specialize in your industry, location and a manageable workload.  These business brokers have access to comparable sales and market information to help set a realistic asking price for the Atlanta business resale market.  Be aware that most buyers will automatically offer 10% to 15% under the asking price.  But if the asking price is too high, they won’t contact you at all.

How to Sell a Business Step #4:  Package Your Business for Sale
Two things will kill a business transaction; time (delays) and surprises.  Before you start marketing your business for sale, you need to prepare a solid overview of the business and a financial package that you will give to qualified prospective buyers.  You should have a Confidentiality Agreement for them to sign before you release any information.  This is where a business broker can be extremely helpful in representing your business for sale.  They will package the business for you and have access to all of the required documents.

How to Sell a Business Step #5:  Market Your Business for Sale
You will want to market your business as widely as possible.  The trick is finding the right person at the right time.  In a business for sale transaction, finding the right personal fit is more important than the asking price.  Most buyers are looking online, but there is no one site that stands out above the rest.  Accessing the contact database of our business brokers is most effective.

How to Sell a Business Step #6:  Get Offers in Writing
The most effective way to negotiate a business transaction is to get the buyer to put their offer in writing.  Don’t imply that you are willing to take less until they prove they are a serious buyer.  If the offer is too low, you can always counter offer.  A business broker can assist you with the negotiation process and help the buyer make an informed offer for the business.

How to Sell a Business Step #7:  Due Diligence
After you have accepted an offer, the buyer will require some time to verify the business performance and other claims you made during the process.  Allowing this time and providing them with all of the requested information is important in protecting yourself legally.  You will also want them to sign an acknowledgement that they requested, received, and reviewed all necessary information and are making an informed decision to purchase the business.

How to Sell a Business Step #8:  Escrow
The business escrow process holds the buyer’s funds securely while clearances are obtained from taxing authorities and the title is searched for possible liens against the business.  This process protects both the buyer and seller from potential surprises and is legally required in some states.  Your Atlanta area business broker can help arrange this process and select a qualified escrow company that specializes in business escrows.

How to Sell a Business Step #9:  Closing Out accounts
After the close of escrow, it is important to close out all of your tax and vendor accounts.  This includes your sales tax, state employer tax, and IRS.  Most require a final statement or tax return to close the account.  Make calls to the utilities prior to the transfer date so the buyer can set up the transfer.   In addition, you should send a letter to all of your vendors letting them know the date the business was transferred and contact information for the new owner.

How to Sell a Business Step #10:  The Transition to Retirement
At the close of escrow, you will transfer the business to the new owner and the escrow company will release the funds from the buyer.  Arrange a training schedule ahead of time that meets the requirements of the contract and lets you slowly reduce your presence at the business over a few weeks.  Make sure the buyer signs off that all of the equipment and assets were received in good working order.  Your business broker will have all of the forms and disclosures required for your specific type of transaction.

Congratulations!  If you made it this far then you have a good idea of how to sell a business.  As you can see, there are a lot of details that must be looked after in this process.  It is highly encouraged that you contact a business broker familiar with the Atlanta area to manage this process.  You should be focused on continuing to run a solid business through to the very end.  Let your business broker handle all of the painful details and the interactions with potential buyers.  In the end, it will be well worth it to have a smooth transaction!