If life were a game (disclaimer: it’s not), then those with their own business have opted to play it on difficulty setting ‘hard’. Years of planning, financial hurdles, ups and downs (mainly the latter), daily stress; who on earth would want this life?
But if you are one of those skilful, lucky people who’ve managed to turn their business into a profit making machine, then who could blame you for wanting to cash in and seek an easier run? Unlike starting your business, when everything is up in the air and it sometimes feels like a game of chance, ending it has a more clear blueprint to follow. Here are the top tips; our 5 IDEAL steps to selling your business.
VALUE WITH PRECISION
The first order of business is determining how much your business is truly worth. We’ve all seen Dragon’s Den, when an overvaluation sees investors seething and the deal tanking. This is it, the real deal, and you can’t just shrug, point at an asset and say “I guess it’s worth £50?”
It’s crucial that you’re precise in calculating how much your business is worth before you let the world know that you’re selling it. While calculating this yourself is possible, it’s best to go through a third-party for greater most transparency and trust. This third party will go over everything in the store, from assets to inventory, until giving an accurate number.
In addition to valuing your business, you need to make sure that all your own financials are in order. Once again, potential buyers need transparency with both vast and intricate detail. All aspects of the business should be available, nothing off the table. This directory of business brokerages provides some ballpark figures that can help you get an idea of what to expect.
BOOST VALUE
Much easier said than done, but we’ll say it anyway; it’s important to boost your business’s value before you sell. Why? Well, not only does it show any buyers that the business is thriving, or that the potential for increased profit exists, but is also shows that the company will be thriving for the foreseeable future with the right effort put in. You can chalk this part up to recency bias; people are going to remember the last moments more than they will the entire picture.
This can be done by improving sales, customer satisfaction, growing the market or modernising the business. That could mean anything from updating software and selling off any outdated inventory to having a final, concerted marketing push prior to sale.
IDENTIFY THE EXIT SIGN
Letting go can be hard, not just for sentimental reasons but also because the majority of your wealth is likely tied up in the business. The reasons for your exit could be many, but a clear plan in place for your exit, well before the sale, needs to be settled on. Will you stay on and help with the transition or will it be a simple cut-and-go job? How soon would you like the transition to take place? Do you envisage a future advisory role in the running of the company or is a clean break more your preference?
Having an exit plan is attractive to any prospective buyers and you as the owner. It will help the transition occur as smoothly as possible.
FIND A BROKER
While you may be a great business owner, you might not be as great of a salesman. Brokers wear many hats in their job and can help value the business, find buyers, look for financing options and help with the transition process. Basically, they’ll be on the frontline of negotiations between you and any buyers and, as such, are invaluable.
Find a broker who will work in your interests and help you make the sale as painless and quick as possible. Selling a business could take months, if not years, and you want someone who will be dedicated to working tirelessly to make it happen efficiently.
DOCUMENTS & TRANSITION
Just like buying a house, there are tons of documents, contracts and letters to review and sign before the deal is complete. The bureaucracy can be intimidating at first, make no mistake.
The first document is an IOI or Indication of Interest. This is a formal, non-binding document outlining the proposed terms of a deal. After that, there is the LOI, or Letter of Intent, which is a more serious offer for purchasing the business. Finally, the purchase agreement is the final document which transfers the business to the new party.
Finally, the transition will have to take place. As mentioned before, it could be a quick or slow transition depending on the exit plan. There could be inventory to go over, software explanations, customer introductions and an overview of how to jiggle the backdoor handle so it will open smoothly. It’s a long process, but is worth it in the end for both parties.