Selling Your Business

Preparing to Sell Your Business

By: The Vanilla Team | Download PDF

As the old saying goes, “The primary purpose of starting a business is to sell it.” If you’re thinking about selling your business now or in the future, here are a few general thoughts to keep in mind:

• Start early. Business brokers report that 99% of the businesses they list are not properly prepared to be sold. If possible, start preparing your business for sale three years ahead of time. This will give you time to fix problems (i.e. old inventory, unprofitable product lines, poor staffing, etc.) and clean up any outstanding ownership or tax issues.
• Systemize your business. A company with a well-documented set of systems and procedures (an “Owner’s Manual”) will always get a higher price than a company without one. Plus, a company with strong systems in place is far less dependent upon the owners, making it more attractive to potential buyers.
• Optimize your financial performance. When somebody buys a business, they’re basically buying a stream of earnings. Your numbers will be a crucial part of your overall story. Any financial improvements you can make before the sale will enable you to paint a much better picture for potential buyers – and, of course, ask a higher price.
• Think of business valuation as a starting point, not a final number. According to experts, the #1 obstacle in buying or selling a business is unrealistic expectations on both sides. Buyers always want to pay less than full value, and sellers usually expect to get a premium because it’s “their baby.” The real trick is to price your business at fair market value and then use that as a starting point. After that, you’ll work out a final price the old-fashioned way: through negotiation and compromise.