Why on earth would anyone want to sell their small business? With all of those favorable reasons to go out on your own, who would want to give it all up?  Pride, recognition and Sell Your Small Businessjob security are a few of the positive features of owning your own business.  Long hours, major learning curves and staying afloat during a lagging economy are three less positive features of your own business. Selling your small business may be one way to avoid those less favorable business elements.

Beside those pros and cons,  there are a number of very logical reasons a business owner may want to sell their small business.  For many, their vision for their long term – or life time – labor of love was to sell it for a tidy profit and retire comfortably.  The bottom may be falling out of your industry due to external changes too difficult to fathom.  You, or a family member may have health issues that will no longer allow you the freedom necessary to continue operating and growing a business.

To present and get the greatest amount of value for all of those years of hard work is at the top of their list of positive outcomes.  But, how can you, and others, make that happen?  As you start thinking about this important phase in the life of your business, it is imperative to address your preparedness to sell your small business.  Your small business is one of your life’s major investments.   You want to do everything the right way to get the most return on your life time investment of blood, sweat and tears.  No one wants to sell a small business and walk away with little to show for their efforts.

Why Are You Selling Your Small Business?

Maybe you started up partnering with a good friend and the friendship has suffered or totally disappeared.  If it was built as a family business, there may be family divisions or the next generation just isn’t interested in carrying it forward.  A couple that started their own business may have drifted apart and are divorcing.  Someone, the owner or family member,  may have become ill or passed away.

The owner(s) might be feeling overwhelmed or just bored and want out.  The other side of that situation could be wanting to be free to embrace other opportunities.  The industry you have been operating in may have had major changes that make your financial return more difficult to maintain.  Selling can be the way to resolve any of these issues.  the biggest issue now revolves around:  How to Prepare to Sell Your Small Business

What Exactly Do You Have to Sell?

Of course, there is always the option to sell the business in it’s entirety – lock, stock and barrel – as the saying goes.  If your firm has grown to include a number of divisions, you may choose to let go of one or more to raise funds to invest more in your main business core.  Perhaps you own one or more business properties, you may want to sell them and recoup your real estate investments.  Maybe you developed some valuable intellectual property or registered some patents of importance to your industry.  Those elements of your business could be sold separately as well.

Example One of Preparation for Selling a Small Business

One designer I know is nearing retirement and starting to think about how to sell her business.  She is fortunate to have a number of options available to her.  One option is to sell to one or more of her current employees.  Another option is that she has an interest in a related business that she can keep and stay active in business a bit longer.  Or, she can seek a buyer from outside to pick up the reins and take over when she rides off into the sunset.

The key thing a small business owner needs to do is figure out how he/she will write themselves out of the business.  That is, how will they become redundant and no longer  needed to run it.  Buyers want a business they can move in and pick up the reins and move forward, without the previous owner in their way.  Often, deals will include the original owner staying on for a set period of time to help ease the new owners in with her existing staff and suppliers.  The quicker this can be accomplished, the better the transaction and transition will be for everyone involved.

When to Prepare for Selling Your Small Business

No one wants to go through a ‘fire sale’ process.  It will not help you achieve the highest potential value.  As with everything successful, planning is your best option.  Start thinking about his important part of your business 3-5 years out if you can.  Evaluate the business to find out what kind of value you have accumulated over the years.  If you are selling real estate, are you facing a Buyer’s market or a Seller’s market?  Do you want to just sell the whole business?  It is advisable to get an evaluation done by a sales broker a few years out.  If you are disappointed in the valuation number, this extra time can let you make changes that will increase value before you need to sell.

Example Two of Preparation for Selling A Small Business

An aging dentist in our area has been building a major dental practice as he prepares for retirement.  As seems typical in the medical and dental profession, a practitioner wanting to sell and reap the benefits of his or her years in practice, brings in the usual younger professional.  The assumption by the buyer is, he/she gets a fully set up office with necessary equipment and a list of ready patients from the retiring dentist.

Often, these changes bring in office set ups with tired, worn out Reception furnishings and outdated equipment.  Paint on the walls and trim is scuffed and chipped.  Wallcoverings have some visible wear and tear.  Customers who loved their original practitioner for years are not so fond of the new person and often go looking elsewhere for someone of their own choice.

This dentist, and the soon to be new owner of the practice, brought in a couple more dentists, a team of qualified assistants and set up in a new, larger and modernized facility.  They also added onsite labs to create their own dental bridges, braces, dental implants and other products they had outsourced to others. When all is said and done, the retiree will have great value in his business as will the new dental practitioner who will ultimately take over.  The new office will include all the bells and whistles of new technology in the dental industry.

Having  time to make profitable changes can make a huge difference in how comfortable your retirement can be.  Increasing the value of what you have to sell pushes the selling price upward. Planning SMART-ly for the changes and implementing the plans are a major piece of how to prepare to sell your small business.

Who to Involve in Selling Your Small Business

This is not a process  I would advise anyone to attempt on their own.  The owner and other leaders of the business should be involved in discussions and plans for selling your small business.  You will need to reach out for some consulting assistance during the process.  Someone to help with your planning.  Maurer Consulting Group can assist you in developing plans for your retirement and any succession planning that might be necessary for a take-over situation by one or more employees.

Another expert skilled in analyzing your firm and and its value can be helpful as well.  This person is often the broker who will represent you in selling the business.  Ideally, the broker will be one with experience selling businesses like yours or related ones in the industry you practice in. Where can you find these people?  One place to start is with the International Business Brokers Association  (IBBA).  IBBA is a international non-profit organization that operates exclusively for people and firms engaging in business brokerage and mergers and acquisitions. They provide business brokers with education, conferences, professional designations, and networking opportunities.

3 Big Mistakes to Avoid When Selling Your Business

There are certainly more than three mistakes to avoid in selling your business.  However, these three are critical to assure your avoiding pitfalls and making the most profit from your sales experience.

Waiting too long to begin planning for the sale

There are many decisions to make and changes to implement to increase the value – and selling price – of your firm.  If the existing value is not what you expect, changes may need implemented to increase the value of the firm.  If employees will be buying and taking over leadership, succession planning and training may be necessary.

Not finding the best people to help with planning, preparation and sale

Your broker, especially, requires someone knowledgeable about your company, competitors in your area, and your industry in general.  Signing up with the first person you talk to can be your greatest mistake.  Take the time necessary to find someone with your best interests at heart.  And, someone with a great track record in selling similar businesses.  It goes without saying, you want someone to give you a reasonable outlook for the process, selling price and timeline.  Don’t jump at the first person who throws an unreasonably high sales price out.  Once you sign with them, they may not be able to get that kind of money for you.

Selling your small business to the right person

selling your small business

Handshake – Agreement – Business Contract

Even if you get top dollar for your business, that offer may not be best – for you.  Remember, you spent years building that business.  It has been your baby.  You want to see it with continued success and growth.  The wrong buyer could well bury all of your efforts once they take over.  A furniture store owned by a couple was successful for quite some time.  When they wanted to retire, they sold the company lock, stock and barrel.  The deal included the business name, which happened to be their family name.

In short order, rumors got back to them from long time customers.   Unfortunately, deposits were made for purchases, but customers’ furniture never showed up. It turned out that the new owners had ruined the credit they had established with well known, high quality suppliers.  Suppliers refused to ship to them without deposits and full payment before shipment.  Of course, the new owners never had the funds to get customer items shipped promptly.  The retired couple came back to run the store, salvage their good name and make long time customers happy again.

In Conclusion

Leave yourself ample time to think through the various options you have for selling your business.  Remember, there is more than just one way to accomplish a sale.  Ideally,  part of the sales process is making sure you enjoy a pleasing departure into retirement – or onto building your next empire.  Once all options are explored, start planning to move the sales process forward in the most positive and profitable way.  Then, interview sufficient brokers to find the best one for you.  It’s not necessarily going to be quick, or easy process.  But, good planning and strategy will help things run smoother and make the sales experience more pleasant all around.