Business owners choose to sell their companies for various reasons, ranging from retirement and compelling buyout offers to financial struggles. If you’re considering sell your business, be sure to:
- Weigh whether you’re ready
- Assess the scalability of your company
- Set financial goals
- Verify that the timing is right
- Plan the next phase of your life
Confirming Your Readiness
If you’re preparing to sell your business, verify that you’ll receive enough funds from the sale to justify the work that it took you to start your company (if possible). Also, make sure that selling your business will improve your overall finances or personal affairs.
Assessing Your Company’s Salability
If you’re planning to sell your business, then be sure to assess the elements that make your company commercially viable.
This includes the history regarding your rate of return as well as your industry’s current trends. Also, review the condition of your company’s property and its location. Other considerations include the desirability of your business and ways to make it more profitable prior to putting it up for sale. To increase the profitability of your company, review your current situation to see if you can decrease your salary temporarily or eliminate travel perks. In addition, price your business properly.
Set a Financial Goal for the Sale
If you’re on the fence about selling because you’re not sure that you can make the amount that you need, consider exploring the selling process through a business broker or an investment banker.
Make sure that you have a clear understanding of your company’s net income statement, balance sheet and cash-flow statement. If you don’t have a comprehensive understanding of these business documents, you could be giving up a great deal of profit while overlooking a tremendous cash flow opportunity.
Also, create a list of the criteria that you’ll need to feel comfortable going through with a sale. In most cases, the process of selling a business takes time. Before you finalize the sale, check your list to ensure that you’re getting what you need.
Often, business owners take it for granted that they’ll have enough funds to retire once they sell their company. According to a number of financial experts, to be able to retire from the sale of a business, you must have enough to generate income at a 4 percent distribution rate. For instance, if you currently earn about $100,000 annually in owner income, then you’ll need to sell your business for around $3,000,000 to retire from the sale.
Check The Timing
Make sure that the timing is right to sell. Businesses tend to ebb and flow with the economy, so be sure to sell your company when demand for your product or service is at its highest. When recessions arise or economic downturns occur locally, it may be better to wait before selling. Other factors may include neighborhood changes, the wellbeing of your company, industry trends and even current interest rates.
Business owners often decide to sell when they no longer enjoy running their companies. If this is why you are considering selling, then evaluate the market to make sure that your company has reached its peak. Conversely, don’t overlook the best time to sell your business because you’re having too much fun operating it. Be sure to balance your enjoyment level with the ideal time to sell.
Planning Your Future
Before selling your business, develop a follow-up plan. The best way to transition from your past lifestyle to a new one is to plan the next phase. This will help you move forward in a positive way. To ensure that your next step excites and inspires you, create a distinct set of business, family, financial and personal goals.
By assessing your options and considering the results carefully, you can make the best decision regarding your business. Before selling it, make sure that you have a plan for your next step as well as enough resources to follow through with it. Once you’ve verified that selling your business is the right move, proceed strategically to make the most funds from the sale.