Selling a business can be one of the most important (and challenging) decisions you’ll ever make as an entrepreneur. Whether you’ve been running a small shop for years or you’re scaling a startup to exit, having a well-thought-out strategy is essential to securing a deal that reflects your hard work.
Below, we break down key steps and considerations to help you determine the best way to sell your business. With Tangent Brokerage, you can quickly and easily sell your business and move onto the next adventure in your life.
Determine Your Goals and Timeline
Start by clarifying your motivations for selling your business. Are you planning to retire? Looking to start a new venture? Hoping to free up capital for an expansion?
Your motivations will shape how quickly you want to sell and the terms you’re willing to accept. For instance, a tight timeline may lead you to prioritize a quicker sale over a higher price, while a seller with more flexibility might hold out for a premium offer.
Selling a business can take anywhere from a few months to over a year. Factors like industry demand, economic conditions, and business valuation complexities all play a role. The more time you allow for preparation, the better you can negotiate and position your business for a favorable sale.
Get a Professional Valuation
Understanding your business’s true worth is crucial. Overpricing can deter potential buyers, while undervaluing can result in missed financial opportunities. A professional valuation gives you evidence-based insights into what the market might be willing to pay, plus helps you set realistic expectations for what to expect. Tangent Brokerage is experienced in valuing your business and making it easy.
Prepare Comprehensive Financials and Documentation
Most buyers want at least 2-3 years of detailed financial statements, including profit and loss statements, balance sheets, and cash flow reports. Operational documents you’ll want to gather for due diligence include:
- Employee organizational charts
- Intellectual property and trademark registrations
- Lease agreements (if applicable), consider options available on renewal
- Bank statement reconciliations
- Detailed ledger reports
This documentation not only helps buyers see the full picture but also boosts your credibility and can speed up due diligence.
Enhance Business Value Before the Sale
If you’re hoping to enhance the value of your business right before selling it, there are a few steps you can take. For instance, a business that operates smoothly without the owner’s constant involvement is highly attractive. Automating tasks, creating operation manuals, and training staff to handle key responsibilities can add significant value.
If a large portion of revenue comes from a single client or product, potential buyers may see too much risk. Expanding and diversifying your customer base and product lines can demonstrate stability and reduce perceived threats. Lastly, review expenses, eliminate unnecessary costs, and explore new revenue opportunities. Small upticks in profit can yield higher multiples when selling.
Decide on an Exit Strategy
You have two main options when it comes to selling your business. First, you can sell your business directly to a buyer. While you might save on brokerage fees, you could miss out on expert negotiating skills and a broader network of potential buyers. The second option is to work with a business broker like Tangent Brokerage. We will handle all steps of the process, including the valuation, marketing, and negotiation. We also have serious buyers that can speed up the sale.
Negotiate and Close the Deal
Selling a business involves assembling lawyers, accountants, and financial advisors. Tangent Brokerage assists you in putting together this team so that you can navigate legal documents, manage financial due diligence, and ensure regulatory compliance. Stay open to all deals, as this will give you the most options. Each structure has pros and cons in terms of risk, total payout, and tax implications. Tangent Brokerage helps you evaluate your options.
Conclusion
What’s the best way to sell a business? It depends on your goals, timeline, and market conditions. That said, certain fundamentals apply across the board:
- Start with a solid valuation.
- Prepare comprehensive financials and tidy up operations.
- Explore different exit strategies, and be flexible in negotiations.
- Work with experienced professionals to ensure a smooth process.
By following these steps and dedicating the necessary time and resources, you can maximize your business’s value, minimize complications, and secure a successful sale that aligns with your personal and financial objectives.
Need Assistance with Selling Your Business? If you’re considering an exit strategy or need professional guidance, our team at Tangent Brokerage specializes in business valuation, preparation, and acquisition support in Illinois, Indiana, and Wisconsin. Reach out to us today at 630-862-5234 for an initial consultation and let’s chart the optimal path to your business sale.