Business ownership is great. It can be a very rewarding and lucrative experience. But, as with any good thing, there comes a time when you’re prepared for it to end. Perhaps you want to retire, move on to a new venture, or take some time off. Or maybe you’ve just realized that you no longer want the responsibility of owning a business. Whatever the reason, you’ll want to sell your business quickly and efficiently, so that you can move on to the next phase of your life.
The only problem? For many business owners, selling their business is easier said than done. There are tons of steps to be taken, each of which can elongate the process and make it unnecessarily complicated if handled the wrong way.
That’s why we’re here. In this article, we’ll outline the seven most important actions to take when looking to sell your business quickly and explain each entails. By the end you’ll have a much better idea of how to streamline the process and make a smooth transition into business retirement (or whatever’s next for you).
1. Review and Organize Accounting Records
Accounting records are pivotal to closing a fast and profitable business sale. Buyers rely on them to understand your company’s track record, and ultimately, gauge its value. For efficiency’s sake, getting these documents in line should be a priority from the get-go when looking to sell your business quickly.
Here are a few tips to make the process easier:
Ensure That Your Records Are Accurate and Up-to-date
This one seems like a no-brainer, but you’d be surprised how many business owners let their records fall by the wayside. As your company grows, so too does the volume of transactions that need to be properly documented. Falling behind can quickly create a snowball effect, making it difficult to catch up.
If you’re not already doing so, we recommend implementing an accounting software like QuickBooks to help streamline the process and ensure that your records are always accurate and up-to-date.
Make Sure Your Records Comply With Accounting Standards
When it comes time to sell, buyers will want to see that your accounting practices comply with Generally Accepted Accounting Principles (GAAP). This will give them greater confidence in your records and help to solidify your asking price.
Get Your Annual Business Planning, Forecasting and Budgeting Documents Together
In addition to your company’s historical financials, buyers will also want to see your annual business planning, forecasting and budgeting documents. These will give them a better idea of where your business is headed in the future and help them to understand your long-term growth strategy.
Build or Find Your Cash Flow Forecast
A cash flow forecast is a document that predicts your company’s future cash flow. It’s an important tool for any business, but especially so when you’re looking to sell quickly.
Your cash flow forecast will give buyers a sense of your company’s financial health and help them to understand its short-term prospects. As such, it’s important to make sure that your forecast is realistic and accurate.
If you’re not comfortable building a cash flow forecast from scratch, you can find templates online or hire an accountant to help you.
Track and Manage Important Metrics
There are a number of important metrics that buyers will want to see when considering your business. These include things like sales, costs, margins, customer churn, employee churn and more.
Tracking and managing these metrics on a regular basis will not only make it easier to put together your financial records come sale time, but it will also give you a better idea of how your business is performing and where improvements need to be made.
Understand Your Industry’s Benchmarks
When it comes to analysis, buyers compare businesses against industry benchmarks. This helps them to understand how your company stacks up and identify any potential red flags. By familiarizing yourself with relevant benchmarks, you can give yourself the context needed to better assess your business’s value.
2. Document Business Operations
Picture this: you’re at a store, about to buy a brand new product. It looks promising, and you can’t wait to reap the benefits of owning it. The only problem? It comes with virtually no assembly or operation instructions. How are you supposed to get value from your purchase? The same goes for businesses. When a buyer is considering your company, they’ll want to know how it works – what processes are in place, what systems are used, etc.
In order to sell your business quickly, you need to be able to answer these types of questions with ease. This means having comprehensive documentation of your business operations.
Your documentation should include:
A Procedures Manual
Procedures manuals outline everything there is to know about a business’ internal processes. They give readers a step-by-step breakdown of how tasks are to be performed, by, who, how often and so on. Having a well-written procedures manual is essential to avoiding confusion and ensuring that existing operations can be carried out smoothly, even in the absence of key personnel.
Who holds what positions in your business? Who reports to whom? These are important questions that a potential buyer will want answered. The best way to do this is with an organization chart.
Ongoing Contracts and Agreements
Signing on as the new owner of a business is a big responsibility – buyers who do it want the assurance that they know what they’re getting into. A summary or collection of ongoing contracts and agreements can provide them with just that, giving them a better understanding of the legal commitments your business has made.
3. Compile/Source Marketing Plan
If your business is like most others, it’s likely that it depends on revenue to survive. This means that marketing is essential, and a key part of any quick sale.
When buyers are considering your business, they’ll want to see evidence that it is capable of generating revenue and sustaining itself long-term. A marketing plan can be a valuable tool here, as it will give the purchaser a roadmap for how to generate leads, convert them into customers and keep them coming back for more.
If you don’t have one already, compile your marketing plan and make sure it includes everything a new owner should know – customer demographics, lead sources, growth opportunities and more. The better informed they are, the more certain they’ll be about next steps.
4. Know Who You Want To Sell To
Not all buyers are created equal. You may be tempted to sell your business to the first person who comes along with a decent offer, but resist the urge! It’s important to take the time to find a buyer who is the right fit for your business. Failing to do so could result in a quick sale that doesn’t live up to its potential.
When you’re looking for a buyer, keep the following in mind.
Their industry: Do they come from a similar background to you? If so, they’ll likely have a better understanding of your business and what it’s worth.
Their financials: Can they afford to buy your business? If not, you could be in for a long and drawn-out negotiation process.
Their plans: What do they plan to do with your business once they’ve bought it? Do their plans align with your own? If not, it may be best to keep looking.
5. Plan for Due Diligence
While due diligence can feel like an unnecessary step, it’s absolutely essential to ensuring a worthwhile business sale. There’s no avoiding it if you want positive results – the best thing you can do is plan for it accordingly.
Start by putting together a due diligence team. This should include your lawyer, accountant and perhaps a business broker or consultant. They’ll be the ones poring over the nitty-gritty details of your business, so it’s important that you trust and feel confident in their ability to do so.
You should also start gathering the documents and information that will be requested during due diligence. This process can take some time, so it’s best to get started early. Common items include financial statements, tax returns, contracts, leases, employee records and more.
Finally, make sure you understand the due diligence process. This will help you know what to expect and be better prepared for questions that may arise.
6. Hire a Good Business Broker
While all of the aforementioned actions are important to selling a business quickly, none of them compare in importance to hiring a good business broker. Doing so will increase the chances of a successful sale and ensure that you get the best possible price for your business.
A good business broker will help you with everything from preparing your business for sale to finding the right buyer and negotiating the terms of the sale. They’ll also offer invaluable insights and guidance throughout the process, making it as smooth and stress-free as possible.
If you’re serious about selling your business quickly, there’s no better way to ensure a successful sale than by hiring a good business broker.
There are plenty of things to know and get done when gearing up for a business sale. The more of these you have taken care of in advance, the faster the process is likely to go. Hopefully this article has served as a helpful starting point for your preparations. Good luck!
Looking to sell your business in a quick and profitable manner? Choose 1-800-Biz-Broker. As experts in all things business sale, we’re well equipped to get the results you need in as little time as possible.