There are many reasons business owners choose to sell their businesses; sometimes sales are low, they need a new challenge, maybe they are tired of managing the day to day or maybe they simply want to relocate to a different area. Whatever the cause, once you determine to sell, you now have a number of decisions to make. Deciding how to go about selling your business will take time and effort on your part but well worth it.
The first thing you need to do is to put together a marketing plan and what better way to do that than by talking with your local newspaper. The newspaper business section is probably the most affordable place to advertise your business for sale as newspapers are always looking for ways to increase their revenue. So as an advertising method you could post your ad cost and ask a reader to call you if they can help you find a buyer for your business. Many times they will be happy to help you and then you will be able to use their contact information to generate interest in your offer.
Another popular method for asking prices is to talk with your new owner. If you have any discretionary earnings, such as investment profits from existing business clients, you may want to discuss these with the new owner to see if there is a possibility of monetizing these earnings. By doing this, instead of asking for a set price, your business broker may be able to negotiate a discounted rate on the final price of your business.
After you have established a list of possible buyers, the next step is to market your business offerings to the crowd you’ve created a list of prospects with. One common mistake business brokers make is asking potential buyers to contact their broker first. This is counter-productive and may result in the buyer not interested in making an offer because he/she is not sure if the broker is the best individual for them. The best way to build your business is to build a relationship with each potential buyer first, and then introduce your broker to that crowd. If someone likes the way you explain your company, offers an opportunity to work with you, and expresses a genuine interest in your business, they are probably a great buyer.
A wise business sale process will not leave the seller on the losing end. If you find a great buyer, your seller should not hesitate to negotiate how much the final price should be and if you are asked to pay a lump sum fee up front. Selling a property with a lump sum fee is common practice when someone is selling their homes within a distressed housing market. In fact, it is even encouraged by lenders and banks to avoid a home seller who has the potential to recoup their down payment and sell at a profit.
Once you have closed a deal and have a buyer, the next step is to conduct a fair and thorough evaluation of your small business. The purpose of this valuation is to give the seller an idea of what the final purchase price should be, and help determine if the investment is going to be worthwhile. Most real estate appraisals are not very scientific and can be very subjective. However, having a qualified appraiser to do a valuation on your business will assure you that this step of the process will be taken. Having an appraisal done will also assist in the negotiation process.
Prior to having your business valuation done, it would be wise to establish whether or not you will be able to generate an income from the business. Many real estate investors try to purchase businesses with low market values because they know that the business will generate an income. Some salespeople try to convince sellers that the business is worth more than it is because they have a flashy sales letter. Although the business valuation will tell you how much the business is worth, it will never tell you whether or not it will generate an income.
When you meet with prospective buyers, be prepared with some basic information about the business. You should know the names of the owner and manager, the current sales figures for each quarter, and the estimated operating costs for each quarter. By having this information readily available, your broker will be able to direct the questions that buyers most likely ask. Your broker can also guide the buyers to the businesses with the highest profit margins, which you may not know about unless you conduct your own business appraisal.