Selling a business can be a challenging process, both emotionally and logistically. On the one hand, you’ve likely spent years growing your business and see it as far more than a job—it’s a part of you. On the other hand, you don’t want your emotions to cloud your judgment and impact the sale.
If you’re preparing to sell your business, it’s important to plan carefully, know what to expect, and surround yourself with the right team to help you get the best outcome. Here’s a ten-step guide to help you sell your business.
1. Start planning early & identify your reasons for a sale
Choosing to sell your business shouldn’t be a spur-of-the-moment idea, even if you’ve received a lucrative offer. Instead, it requires careful consideration and planning.
If you’ve started to have ideas about selling, get curious about where those ideas are coming from. Spend some time weighing the pros and cons. And if you find yourself leaning more and more toward selling, you can start proactively getting your business’s finances in order to prepare for a sale.
Know your why
There are plenty of reasons you may decide it’s time to sell your business. Perhaps you’re ready to retire and hand off the reigns to someone new. Or perhaps your life goals have changed, and your business no longer aligns with what you want your life to look like.
If you aren’t entirely sure why you want to sell, it may be helpful to start with the end in mind. Once the sale of your business is complete, where do you see yourself? Spending more time with family? Starting a new business?
There’s not necessarily a wrong reason to sell your business—you just have to know your why.
2. Decide on timing
Timing is critical when it comes to selling a business. You don’t want to rush into a sale unprepared, but you also don’t want to put it off longer than necessary.
It’s helpful to start planning early, as we mentioned in the previous section. Start preparing yourself and your business well in advance so you can improve your business metrics, organize your business financials, and have everything else in place. This will allow the sale itself to go as smoothly as possible.
A few other logistical factors to consider when deciding on the best timing include your personal financial goals, the tax implications of the sale, buyer interest, and the current economic climate.
3. Know your numbers
No one knows your business better than you do, and now is the time to prove it. Throughout the process of selling your business, you’ll need to know your numbers at the drop of a hat, from your sales revenue to your customer acquisition cost to your return on investment.
If you don’t feel particularly well-versed in your business’s finances, become a student again. Study your books, perhaps with the help of your accountant or other financial professional, and learn as much as you can about your business.
4. Get a business valuation
The business valuation is one of the most important aspects of the sale process. It determines how much your business is worth and how much you’re likely to be able to sell it for. There are a few different valuation methods to consider, including the asset approach, income approach, and market value approach.
Don’t expect to complete the valuation yourself. Instead, you can hire an appraiser, such as someone with the Accredited in Business Valuation (ABV) designation, to do the business valuation for you. The more legitimate the valuation, the better the trust you’ll build with prospective buyers.
5. Build a strong leadership team
If you’re a business owner, you already know the value of having a strong leadership team in place, and this is even more important when you’re preparing to sell. Having the right leaders in place can help you prepare your business to sell and they can help you improve your business’s operations and metrics to get the best price for your business.
A strong leadership team can also be attractive to potential buyers. If you’re the sole business leader and are planning to exit with the sale, you leave the next owner in a difficult position. But if you’re leaving behind a strong leader (or leaders) who can run the business as well as you can, a buyer will feel far more confident about taking over without major hiccups.
6. Prepare for emotional challenges
Selling a business, especially one you’ve spent years (or even decades) building, is about far more than numbers. You’re likely quite attached to your business, so selling it can be an emotionally fraught process. To separate the logistical side of the sale from the emotional one you should have tactics and strategies in place to deal with your own feelings about the sale. Here are a few ways you can do that:
- Build your personal support team: Your support team will likely include your family and friends, but may also include industry peers and advisors. Depending on your personal preference, it may also include a therapist or another mental health professional.
- Anticipate your emotions: Know ahead of time that you’re likely going to have strong feelings about selling your business, and there’s nothing wrong with that. However, plan ahead for how you’ll deal with these feelings, especially if they come up during business-related meetings.
- Have a plan for what comes next: It can be helpful to focus on what your post-sale life will look like. For example, if you’re selling your business so you can retire and spend more time with family, focusing on that can help ease the emotional stress of letting go of such a major part of your life.
7. Assemble the right team of advisors
Just as it’s important to have the necessary personal support by your side when selling your business, it’s also important to have the right business advisors.
These professionals, which may include a business attorney, a financial advisor, a CPA, and possibly a business broker or advisor, can help ease some of the burden of the sale process.
After all, if you’re a small business owner, there’s a good chance this is the first time you’ve sold a business. These professionals, on the other hand, have helped countless other entrepreneurs through this process and can bring a different level of experience to the table.
8. Manage expectations with strategic communication
Whether you’re dealing with your employees, your business advisors, your buyer, or your personal circle, clear and open communication is critical. Remember that just as this sale affects you, it also affects other people. Uncertainty can be a significant source of stress, especially for those who don’t know where they will end up after the sale of the business.
A key aspect of this communication is knowing who needs to know what information and when. You can also manage expectations in the way you frame the process. Framing it as a positive move may help relieve some of the anxiety of your employees and others.
Finally, be open to hearing concerns from all stakeholders. When addressing these concerns, it’s important to remain both reassuring and honest. Don’t lie to them, but also don’t add to their fears unnecessarily.
9. Focus on creating transferable value
It’s in your best interest to create the most value in your company as possible before passing it off to the next owner. After all, the greater the value of your business, the more you’ll walk away from the sale with. A few areas of focus to consider as you work to increase value include:
- Reducing dependence on you as the owner
- Increasing business revenue
- Increasing efficiencies and decreasing costs
- Optimizing your business processes
- Integrating streamlining technologies
- Managing business debt
- Developing and protecting intellectual property
10. Understand the financial implications
It certainly comes as no surprise that there are financial implications to selling your business. Staying on top of your personal finances can help you prepare your business for sale, choose the right buyer, and walk away from the sale feeling successful.
One thing to consider is whether your sales goal—i.e., how much you hope to sell your business for—and your valuation are aligned. If your business valuation is falling far short of how much you hoped to make on the sale, there may be more work to be done before moving forward.
Once the sale is finalized, you’ll likely be receiving a significant lump sum, possibly larger than any you’ve received before. Here are a few steps you may want to take to help make the most of those dollars:
- Consult a tax professional: They can help you learn about and minimize the tax implications of receiving such a large sum at once.
- Work with a financial advisor: A financial advisor can help devise a plan for the money you receive to create long-term benefits for those dollars and help you reach your other financial goals.
- Proceed slowly: You don’t have to put all the money to work right away, and you probably shouldn’t. Consider waiting at least a few months—ideally even longer—before making any big money moves.
The bottom line
As you’re preparing to sell your business, it’s important to take a rational and measured approach while also acknowledging the emotional impact it will have on your life. The process can take months to years and includes everything from making the initial decision to sell to getting a business valuation to preparing your business and team for the transition.
This major life change isn’t one you want to go through alone. You’ll want a team by your side, including an experienced financial advisor who can advise you on both your personal and business finances. Schedule a complimentary consultation with a Wealth Enhancement advisor to find out if we’re the right fit.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
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