Selling A Business
It is a common notion to consider selling a business while incurring losses. Sometimes business founders start losing interest in business activity, they started passionately. Often macroeconomic conditions such as economic recessions compel you to sell a business.
You may find a reason for why you are selling a business, but doing it the right way can boost your business valuation considerably.
Consider these important steps before selling a business.
Keep the Key Employees – Including Yourself
Business buyers will consider the most important asset of your business first; Human Capital. Do not discard the key employees of your business who are the heart and soul of your business. If possible, do not detach yourself from the business.
Selling A Business | Buyers will be willing to offer a higher price if you can keep the key employees with the company. Keeping experienced employees will reduce hiring costs for new business owners. It reduces the disruption of change and makes the change process smoother. As much as it adds value to your business, it attracts buyers appreciably.
Increase Profitability Before Selling A Business
It may be hard for you to think of increasing profitability if you are on a losing streak. If your business sales are dropping and revenues are shrinking, you may find it harder. It may not an easier task but there are a few ways that can help you increase profitability.
Improve your profits by decreasing unnecessary expenses. Think of it as a strategy to improve the operational efficiency for the short-term. For example, by reducing some of the overheads. These steps will increase your profits that will create an upwards graph for profit figures. Increasing profits are always a healthy sign for any business.
Consider Improving the Intangible Assets
Intangible assets are the soul of your business. You will include intangibles in the business valuation. Business contracts, employee experience and skills, sales forecast, upcoming projects, etc. are all important parts of your business’s intangible asset section.
A key point when deciding on intangible assets is to decide on patents, trademarks, and copyright issues. Leaving a business with valuable assets such as a research patent or a logo trademark can improve your business valuation manifolds. It creates product/service differentiation for your business. Without a doubt, it is one of the key factors business buyers consider before making a purchase.
Arrange Long-Term Business Contracts
One way of improving business profits is through creating consistent sales. When you plan an exit strategy, plan for the long-term business contracts. It creates consistency and stability in the business. Buyers will be interested in knowing the long-term sales forecasts as well. Do not disclose the business sale transition too soon, but it will be better to inform your vendors in time.
Long-term contracts generate regular revenue for any business. Recurring sales keep a business smoothly running. Make sure not to create the situation artificially before selling a business. Leaving behind the receivables or customer contracts unfinished will not hide for long. It may complicate things for you by the time your business suppliers hear about the transition.
Improve Operating Efficiency
Investing in a business that you are willing to sell can be hard to think of. It’s a common case with businesses selling at a point when their operating efficiency is lower. An important reason for losing efficiency is scrap machinery and equipment. Investing in operational tools will eventually improve the operating efficiency, hence the profits.
It takes a year or so to sell a business. The time may be long enough to create further wear and tear on operating tools. If possible, invest in some key machinery and equipment overhauling. You’ll receives investment with profits by the time the business sale transaction completes. Before that, it will showcase your business in a smooth-running position.
Don’t Leave the Business in a Mess
By the time you consult a business broker, start cleaning up the business mess. Do not leave unfinished contracts, lease agreements, internal process improvements, and any legal matters unfinished. Arrange the necessary renewals and bank replenishments in-time.
Consider physical outlet conditions as well. A little effort into the renovation and repair of the premises will go a long way at this stage. It will create a good first impression of your business. Make sure to inform the potential buyers of your preparedness effectively.