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Thinking about selling your business? This article goes through potential reasons why you should do it and where to find buyers.
The "Should I sell my business?" question can come to accomplished entrepreneurs, retiring business owners, or founders who want to do something new, whether returning to a corporate setting or buying another existing company to grow.
Selling your business is no small thing. The seller's remorse is real: 75% of business owners regret selling their company just one year after the transaction, according to a PwC research mentioned by the Exit Planning Institute.
In this article, you'll find key reasons and signs to consider before selling your business.
Related: From a marketer to business owner: How Derek Delost found his passion
If you plan to sell your venture, you should assess the reasons behind any potential sale. The business performance, cash flow, succession planning, and other factors can help you decide when to let go.
Related: Starting Up vs. Buying Out: Sylvie Froger Shares Her Wisdom On What's Best
As an experienced business owner, there are other opportunities for you ahead. Perhaps you're interested in jumping into a new endeavor for which you need cash or more available time to manage a new company.
Also, it's possible you will find a business opportunity that is far more aligned with what you're looking for in your future. But starting the new challenge means you'll need money or time, which leads to giving up your current business ownership. According to the Exit Planning Institute, 80-90% of business owners' wealth is related to the value of their business.
If you built your company early in your career, you might reach a point where you look for something that is more aligned with your current lifestyle. That's when business buyers come into the equation since they can purchase the company and give business owners the freedom they want.
Related: Business Exit Strategy: 5 Ways To Leave Your Company (+ Examples)
When your business isn't as profitable as it was before due to rising costs, a lack of growth in the industry, or a shift in market preferences, it's a good sign to let go of it. It's important to highlight that a lack of profitability alone doesn't mean your business has no value.
There might be several different factors causing this issue and maybe you are not in the mood to turn things around.
If you have a family business and there are no potential successors, planning the sale as a next step can be the smart thing to do.
Doing this with time can also allow you to train the next generation of the management team to see if the business can work without you or be part of the transition and future of the business by offering your experience -and even financing- to the next buyer.
Over the years it might be possible that the number of competitors in the industry and risks of the business operations increase to a level with which you're no longer feeling comfortable.
Relying too much on just a few available providers in the industry can impact business operations in the long run (this is especially true for online businesses whose most of their sales come from Amazon). Under these circumstances, some sellers decide to start the sales process.
There are also litigation risks that could jeopardize the company's future. When selling the company, owners should disclose to potential buyers if there are any pending lawsuits. However, any party interested in purchasing the business will discover this during due diligence.
If managing the business doesn't feel any more like a challenge due to a lack of strategy for the future, then it's possible that business owners feel like it's time to move on.
Additionally, through the year, entrepreneurs can face many challenges they hadn't accounted for (increased and new risks, industry trends, and personal leverage due to twists and turns). If there isn't a contingency plan that can give some guidance and support against these potential issues, then the lack of business strategy can feel overwhelming for the management team.
Neglecting to pay attention to the big picture can cause major problems for the business, such as relying entirely on a provider or a big customer, ignoring industry changes, or the owner constantly having to use their money in the business. This scenario can point out a selling process as a good alternative.
Running a company is no easy job, which can take a toll on the business owner's health. This can lead to looking forward to retirement or simply taking time to rest. Whichever the reason behind their sale, many business owners can always decide they've reached a point at which they should lay back and enjoy what they have worked so hard for.
Related: Places to list your business for sale
Still not sure if selling is the right choice for you? Here's a list of 3 potential reasons that could make you go back to your plan and choose to keep your business.
Depending on how you manage the selling process, you'll be subject to multiple taxes that can decrease the final amount of money you see in your bank account. Because of this, some business owners decide to keep their business and focus on receiving dividends.
Of course, this is not true for most entrepreneurs. It will depend on how the business deal is done, how the company is structured, and even in which state it resides legally. These factors can make a big difference when calculating the final amount you must pay the government after selling your business.
A business with high costs can overshadow a potential good deal. Ventures with low margins compared to their expenses won't be appealing to potential buyers.
Because of this, your business might be perceived as a risky acquisition, although some buyers might overlook the high costs if they see strategic value. For example, accessing your customer base or using intellectual property.
For this reason, owners can focus on reducing their costs to boost their business valuation and then look for the right buyer. During that process, they can look for costs to cut, become more efficient, and increase profitability.
The company's future could still hold more growth opportunities that, in the long run, would help owners make more money through the sale of the business.
Also, if the company's forecasts predict sales growth in upcoming quarters and years, business owners could hold off. Just after they're sure the business has peaked, they can begin the sales process and start looking for prospective buyers.
Now that you have decided to sell your business, here are 8 key factors that will help you during your process and make things easier for you and the new owner.
When establishing a business value, entrepreneurs can underestimate or overestimate it. This can be due to personal goals and expectations, market conditions, valuable assets, and other external factors. Owners should be willing to be flexible during the business sale and listen to the offers based on the buyer's due diligence process. Having a third party like Boopos can help bring fairness to the purchasing process.
A key factor during the sales process is the business valuation. At Boopos, you can get a complimentary valuation to get an idea of how much to expect from the transaction.
When experts do the valuation, buyers, and sellers can get on the same page about the business's worth faster and establish common ground to negotiate. A business broker can help you find the right buyer who will be willing to pay what you're asking for and to align with some of your requests. On the other side, this figure can help you give in to some of the buyer's petitions.
It may take time to find a buyer who’ll pay the asking price or agree to terms and conditions.
To reach a successful transaction several factors come into play, and patience is one of them. First, business valuation takes time. Then, the process of finding prospective buyers and talking to them can be time-consuming. The business transaction process can also take weeks or months.
Most business owners who sell their business are looking for liquid cash, but sometimes this might not be possible. In some cases, payment may appear in different arrangements. On this matter, sellers should also stay flexible, if not they could be missing a big deal.
Some deals will require the previous owner to be an advisor for a few months to ensure the transition runs smoothly. Sellers might agree with this condition or would want to finish the business deal as soon as possible. During the negotiation process, it's important to establish clear terms, specifically on subjects that can impact the business owner's future plans.
Even if you're not entirely ready to sell, this will help you find the best buyer for your business in the future. Putting up your business in the market won't be because you're in a hurry to sell it but because you want to take your time when assessing the different buyers who approach you.
Also, remember that not all proposals will meet your requirements. You'll have to wait and evaluate all the available options. During this process, you can assess if the buyer is aligned with your expectations, your customers, your business plans, and more.
By starting the process early on, you'll have the opportunity to gather all the necessary documentation at your own pace, work on your financial statements, fix any issue on your business structure, and go through the process with an advisor to make sure it's a good deal for you. Beginning the process early on will help you find the buyer who's willing to pay what you're asking for.
Related: Letter of Intent (LOI) to Purchase a Business: What Is It?
There are several documents needed to sell your business, such as profit and loss statements, balance sheets, or business licenses and permits, to name a few. Sometimes, the new business owner will need a day-to-day manual, a detailed description of the company's roles, guidelines for the operation and use of the company's assets, and any other extra file that can explain how the business is managed.
Buyers are interested in acquiring the most profitable businesses possible. They will pay attention to every small detail in the financial statements of a potential acquisition. If you're planning to sell your business, you could go through your files with an accountant's help to ensure you aren't leaving out or missing any important information.
Look at tax returns from the past 3 to 4 years, income statements, balance sheets, and more before submitting them to prospective buyers. You have to make sure that all of your revenue streams and final amounts are properly accounted for in your documents.
There are many business marketplaces online where you can market your company for sale. Boopos focuses on SaaS and other online companies, but there are other places you can look to connect with a potential buyer.
Boopos offers you, as a business owner, access to qualified buyers and guidance from experienced advisors.
By attending industry events, such as conferences or talks you get to know more relevant players in your field. Doing so will help you access a broader catalog of potential interested people in your business.
This strategy involves getting in touch with vendors, customers, and even competitors that you think would be interested in your business. Doing so lets you be more selective when choosing and assessing buyers. You don't have to list your business sale publicly since you can approach any third party before announcing your potential exit.
Additionally, some members of your organization might be interested in acquiring your business. Before moving on with any other buyer, think about those who could fall into this category and reach out to them.
Business brokers connect sellers with buyers and manage the whole acquisition process to make sure both parties are satisfied with the terms and conditions. Seasoned brokers already have the contacts to find the right buyer for a business on sale.
They also conduct a valuation analysis on their own to help owners establish the right asking price before listing the business for sale.
M&A Advisors act as intermediaries during the business transaction, but they mostly focus on mergers and acquisitions. Mergers and acquisitions advisors will grant you access to a net of top buyers and even completely negotiate the whole deal on your behalf, surfing through the complexities of an M&A.
If you are ready to sell your business, Boopos helps you connect with qualified and serious buyers that not only can pay what your business is worth but that might take it to the next level.
Sell your business with Boopos!
