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Preparing to Sell Your Business

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Preparing to Sell Your Business

Over the years I’ve seen so many Small Businesses sell out for much less than their businesses are worth for no other reason than they left it too late to list the business for sale. Don’t leave it too late to plan to sell your business.

From my experience, there are 3 main reasons people sell:

  1. Their cash reserves have depleted, and they aren’t able to sustain the business during a particularly slow period.
  2. They have completely exhausted themselves physically and mentally.
  3. They bought the business with the intent to sell it for a profit and do just that.

Assuming you have a profitable business, you should aim to be in position number 3 if you want to sell your business for the best possible price. But, how can you ensure you don’t end up in position 1 or 2 and leave it too late?

Research your industry.

According to Bob House in his article on Inc., How Long it Actually Takes to Sell a Small Business, it can take around six months, depending on a few variables. Talk to several local real estate agents/business brokers to find out how long your type of business, in your area, is taking to sell from listing to settlement.

If you wait until your cash reserves are depleted, or you are completely mentally and physically exhausted before listing your business for sale, you may not be able to hang on for six months or longer and may have to reduce the price to exit sooner, or worse, close up shop and get nothing.

Have an exit plan.

Even if you have been in business for years and have no intention of selling, have an exit plan. Work out how much you’d like to sell your business for. Talk to reputable real estate agents/business brokers and get a feel for what’s selling in your area and what’s not.  Ask them for an evaluation of your business as it currently stands.

Talk to your accountant and financial advisor and get a valuation on your business. If the real estate agent and accountant’s valuations are conflicting and not matching your ideal selling price, find out what they believe you need to do to get the selling price up to where you want it.

Be realistic about your ability to achieve it.  Will you need to:

  • Increase your turnover;
  • Upgrade your fit out or equipment;
  • Reduce your operating expenses (e.g. salary); or
  • Negotiate a rent reduction?

Is it realistically possible for you to cost effectively build the value of your business to where you want it within a reasonable timeframe? If so, set up a plan to make it happen in as short a timeframe as possible. Be mindful of the investment versus return in this exercise.

Check out the great advice available on exiting your business at business.gov.au.

Sometimes when their business has consumed their lives for so long, some Small Medium Enterprises struggle to know what they will do when they exit. As a result, they reject offers for their business they should have taken, and six months later, sell for less to get out.

What will you do when you sell?

Have a plan for what you’ll do when you settle. It will keep you focused on what you really want, and you won’t get caught up digging in your heels when you really shouldn’t.

Check out Harold Pine’s Entrepreneur article, You’ve Sold Your Business. Now What? for some ideas to kick start your thinking.

Whether or not you are ready to sell, start thinking about selling. Taking the time now will put you in a great position to get what you deserve for your years of hard work and struggle when the time comes.

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