Taking an exit on your business is a difficult decision, but at times you have no option but to do away with your business. There are many reasons why one may decide to sell a business, these include failure to meet expectations or an offer that is too good to say no to. Contrary to popular belief, selling a business is not always a bad thing. You may be able to carve a better future by letting your company go into better hands rather than continuing to run it. However, there are a number of things you must keep in mind when you decided to part ways with your business.
To make sure that your sale turns out to be a beneficial one, there are a few things you should keep in mind when getting your company sold. They include:
1. Valuate Your Business Properly
You must know how to value your business to be able to gauge offers and set an acceptable price. Unlike assets, businesses are not valued on the market price. There are a number of things you need to consider when valuing a business. They include:
- The value of debtors
- The value of creditors
- Business’s goodwill
- Assets owned etc.
There are many professionals who can do the job for you. However, if you wish to save money you can do the maths yourself. However, remember that you may not always get the offer you expect, and you may have to settle for less, especially if you’re business isn’t doing well.
2. Keep the Future in Mind
Selling a business just because it is not doing well today is not a very wise idea. YouTube, for example, is the biggest video sharing platform today, but it did not turn in any profit for the first few years of its business and is still said to be a non-profitable venture. However, its owners (Google) has faith in it and is still continuing to put in efforts, and the video sharing platform is expected to turn profitable in the next few years.
The decision to sell or not to sell a business should be taken keeping the time lag in mind. Just because your business isn’t profitable today does not mean it will not be profitable tomorrow.
However, this depends on a number of reasons. For example, if you’re selling your business due to a move to another country, then what the future holds may not be much of a concern. Nonetheless, if anything has potential, it must be utilized fully.
3. Buyers Do Not Always Consider the Future
Remember that your buyers will quote a price based on the current worth of your business and not how it is expected to grow tomorrow. The future is unpredictable. You may expect your business to give a ROI of 20% tomorrow, but if the ROI is 10% today, you will have to accept offers at that rate.
This is why many entrepreneurs first upgrade their business before they put it up for sale. For example, if your company has some office property, something as minor as renovating your office may increase the value of your business. These are little tricks, but work like magic.
4. Know all The Figures
You must know all relevant figures by heart, and remember that profit is more important than revenue. When it comes to a business, how much you sell is of less importance than how much you take in the name of profit.
For example, a business that generates a revenue of $50,000 per month but with a net profit of $5,000 only is less attractive than a business that generates a revenue of $30,000 per month but with a net profit of $6,000. However, remember that the net profit is NOT the only number that is of importance to buyers. A business’s market standing is of huge importance as well, in addition to what it owns.
5. Keep Your Required Documents Handy
You must make sure to keep important documents handy at all times. These include lease papers, financial statements and other such documents. Remember that your buyers will not always trust what you tell them. They would be interested in proofs, hence it is important to have everything ready.
Also, make sure to stay honest at all times. Heightening figures or lying about a business’s potential can cause you more damage than good.
Getting your company sold is not as easy as it looks on paper, especially if you’re not running a very successful business. At the end of the day, everyone wishes to make a profit and most people would shy away from buying a business that is not doing well. In such a scenario you may have an option to sell your business in parts. This means you can sold assets to one person and trademarks (along with product, of course) to another. The idea is to find a way that maximizes your profit.