There comes a point in time in every great business venture when you will want to sell your business. Maybe you’re at that point now but you’re not really sure if you’re 100% ready to sell. Maybe you’re not too sure how to make your business attractive for potential buyers.
Whatever the case may be, don’t despair. We’re about to tell you in this blog post what you need to know before you sell your business.
1. Is Your Business Worth Selling?
This may seem like a silly question, but the fact is not all businesses will attract much interest from buyers. Take something like a video store which is considered to be a commodity. You’re probably not going to get many people interested in buying that kind of business. Compare this to a tech company that develops customised AI solutions for real estate companies.You’ll find that the tech company is more attractive to potential buyers.
You need to consider whether or not you’re business will be seen as a commodity by buyers or whether it is the kind of business that can still be profitable decades later.
2. Get Your Cash Flow Under Control
One of the most important things you can do to drastically improve the value of your business is to improve your cash flow. Simple things you can do immediately to improve cash flow are moving your business’ location to offices with cheaper rent or cutting family perks in your business. Matt Quinn, writing for Inc.com, outlines five more ways you can improve cash flow in this article that will make your business appear more interesting to potential buyers.
You need to be able to show potential buyers how much profit your company makes each year, each quarter, and where it is being made if you want any chance of being able to sell your business. You should be able to answer any financial questions that potential buyers may ask if you want to sell your business at a profit.
3. Narrow Down On Your Niche And Specialise
A business that is appealing to every one is appealing to no one. If you want to attract buyers and interest, then you need to choose a niche for your business and concentrate on dominating that marketplace. For example, you may be running a software business that builds customised solutions and programs specifically for real estate companies.
Once you’ve chosen your niche, make sure you specialise by focusing on a specific area. This could be a specific product or service you offer, or even some kind of program aimed specifically at your company’s target audience.
Lastly, look to develop your company’s core competencies. If your company has core competencies developed then it’s going to be a much more attractive organisation to potential buyers. If you don’t focus on these areas then it’s unlikely you’ll build a profitable business in the first place. So make this a priority if you’d like to sell your business.
4. Create A Mini Business Plan For Potential Buyers
Just like selling anything else, selling a business requires good salesmanship. One great way to sell your business is by demonstrating to potential buyers why your business should be attractive to them. The most effective way to do this is by creating a mini business plan.
In this plan, you want to outline what makes your company so attractive. It could be something as simple as staff retention. You may want to highlight how you’ve been able to develop a core group of long-term employees, which shows stability and loyalty to your company. You may want to include financial projections the company is expected to hit as a result of entering into a new submarket.
5. Make Your Role Redundant
If you play a key role in your business’ growth and operation then it’s advisable to consider making yourself redundant or at least hiring someone who will take over your role when you leave.
Doing this shows that the company can function without you and that you’ve given this a lot of thought. Furthermore, it also helps employees, especially long-term employees become familiar with the idea of new ownership after many years of the business being in your hands.
A buyer should be able to purchase your business and it should be able to function as well, or at least almost as well as it did when you played a key role in the company’s operations and growth.
Got Questions About How To Legally Sell Your Business?
We understand that selling a business can be a daunting step for many business owners. You may have many questions buzzing around in your head about this process. Book a free Startup Legal Session with us today and we’ll answer your most pressing questions about how to legally sell your business.