From the moment you decide to sell your small business to the time you sign it over, selling a business can seem like a long, arduous journey. Throughout the past couple decades, the average time it took has gone from a couple months to almost a year. Moreover, depending on how smoothly the process goes, it could take as long as 10 years or more. That being said, there is generally a direct correlation of how prepared you are to how much time it takes. With that in mind, it is important to understand the process before attempting to sell your business.
The sales process
As stated, understanding the sales process is vital when attempting to cut down on the time it takes to sell your business. Kris Karlson does a good job of summing up the five phases of the sale.
- Initial meeting – Meet with a business broker to go over your business and your plans for selling. Here you and the broker will begin to strategize how the sale will go.
- Research, plan, build value – This is the phase that fluctuates most as it can last anywhere from less than a month to several years. You and your broker take this time to research and analyze your business, take a look at the market and figure out ways that you can add value to your business. The end of the stage comes about when you’re finally ready to sell.
- Marketing– This phase has much to do with your business broker. Your broker should prepare the marketing materials, seek out and create a list of potential buyers, actively go out and sell potential buyers on your company, meet with these potential buyers and then pit potential buyers against each other to attempt to get the best deal. Pitting these potential buyers against each other should also help to expedite the entire process.
- Due diligence – Now more than ever this phase can take up the most time and even kill some deals. Based on the market and the fact that everyone has become tighter financially, potential buyers are taking as much time as possible to scrutinize businesses to make sure that they want to buy them.
- Final negotiations, deal structuring and final paperwork – The good part is, much of the steps taken in this phase can actually be done in the previous phase. Once you get to this phase the deal is basically done so you can start chilling the champagne
No two businesses sales ever go exactly the same. Nevertheless, the process stays about the same
Make your business too good to turn down
One way to make sure that the sale of your business goes quickly is to make it as sellable as possible. Some of the best things you can do include:
- Bringing transparency to the sale – Make sure there are no surprises from the beginning and that when potential buyers look into your business they won’t find anything they don’t like later on.
- Easing the transition – Offer to stay on during the transition or to train the new managers when they come on. Anything you can do to make the transition easier will help.
- Ensuring your systems and people are good to go – After a buyer takes over they want to make sure that all processes in place (including employees) will remain as such.
- Emphasizing future profit or potential – It’s all well and good that you’re making money now, but potential buyers want to see that your company will continue to be profitable for a long time to come. Offer as many “hidden values” as you can and show how the business can stay as profitable or become even more profitable as time goes on.
Selling your small business can seem like a headache, but understanding the process and being prepared will help to make it as quick and painless as possible.