Selling a Business for a Profit

There are many reasons why people decide to sell their business, but all sellers have at least one thing in common–they want to sell their business for a profit. You might believe that the amount you can get for your business is determined by the market or by chance, but in reality there are many aspects of the sale you can control that will have a significant effect on the price you can put on your business. If you are even thinking about selling your business, then you might want to consider some of this information to improve your prospects of selling a business for a profit.

The decision to sell a business is one of the largest and most important steps that entrepreneurs will take in their lifetimes. It will also most likely be the financial deal by which all your other deals are measured. The sale of your business is an opportunity to transform years of work and dedication into a very real, tangible profit. Since a business sale is considerably more complex and intricate than selling a house, then it’s only logical that the process and preparation for selling your business is much more involved than putting out a “for sale” sign.

There are several steps you can take as the seller to maximize the amount for which you can sell your business. However, in addition to your actions, timing can play a large role. Attempting to sell your business during a recession may not be the best course of action. It will take longer to sell your business and you will probably be unhappy with the final price you receive. It’s much easier to sell your business during an economic upswing. In addition to tracking the overall economy, you should be tuned into specific industry trends as well. It’s possible your industry might be facing hard times even when the general economy is healthy, and vice versa. If you can wait for better times, you’ll be in a better position to sell your business for a profit.

Why are you selling your business? The number one concern that potential buyers are likely to have is that you’re selling your business because it’s unprofitable. Remember, many buyers are anxious to avoid the normally lean years that businesses face when first started. They’re shopping for an established business because they expect an easier, quicker road to profits. To maximize the price that your business can command in the market, you need to be prepared to prove the profitability and financial health of your business. If buyers smell trouble, it will have a negative impact on your selling price.

Buyers will want to know as much as possible about your business, and they have a right to ask for information. Normally, you will require that they sign a confidentiality agreement, but otherwise you should fully disclose all of your business information. In fact, you should have most of the reports and documentation prepared and ready for review by qualified buyers before the sale is announced. If buyers have to wait for this information or ask for it repeatedly, their enthusiasm for buying will wane, and their suspicions will increase.

Unless you’ve sold your own businesses before, you’ll probably have no idea about the true value of your business. You may want to engage the services of a business broker to help you value the equipment and assets that you have. Brokers can also provide valuable information about similar businesses that have sold in the past. Being able to review the sales of comparable businesses will enable you to list your business at the highest reasonable price.

If you decide to work with a business broker to help with selling a business for a profit, then you should trust their experience and advice. At the same time, remember that you have valuable, industry-specific knowledge to share. You should be an integral part of the broker’s marketing team. You’ve lived and worked with your business for years. Sharing that information with your broker will help create a compelling marketing presentation.

Finally, spend some time putting yourself in the place of the buyer. Try to understand their motivations and concerns. If you can directly address the points they’re interested in, you’ll be able to build trust and rapport more quickly, and pave the way for more serious and productive negotiations.