Selling an online business is never an easy process. However, the rewards can be awesome. The success of the sale will prepare you for whatever route you decide to take, and ultimately, life-changing.
The value of your business is as a result of several factors. Some of these factors, for instance, the state of the economy, you have no control over them.
But rather than complaining about those factors, why don’t you focus on areas you can influence? Selling a business requires planning – everything from updating financial records to updating old operating systems.
In this article, we have explained the five key things you need to have on hand that will help you prepare and increase your chances of a successful sale. Getting it wrong at the beginning can ruin any hope of a sale, and this can mean much of your time will be wasted.
1. Determine the Value of Your Business
An expert can provide a realistic estimate of the value of your business. He can review your business and its competitive environment. To realistically value your business, consider everything in the company, starting from annual sales to account receivables, stock, and other assets as well as accounts payables. The goal of valuing the business is to identify its threats and opportunities that define its worthiness.
Generally, businesses are worth 3 to 6 times their annual cash flows. But this depends on the business’ financial performance, market demand, location, and industry trends.
2. Clean up Your Business Financials
In the modern entrepreneurial world, potential buyers want transparent transactions. They take time to carry out a more careful investigation to have a deep understanding of the business from its financials to operational history.
To get a buyer quickly and more efficiently, ensure that all your financial records are in good order. Work with your finance officer to prepare clear financial statements for at least three previous years in a row. Ensure that all income and expenses are accounted for to reflect the true value of your business.
Cleaning up your financial records will provide a proof to the buyer that your business is trustworthy. Any buyer will want to see records of the sales growth, reliable suppliers, and customers.
Do not combine your assets with those of the business. You can quickly lose the sale if you merge your business with your personal assets. A potential buyer is likely to have trepidations if you have not updated all your financial records. Having updated financial records will lead to a higher value for the business, thus attracting a high sale.
3. Find a Business Broker
You might be a good entrepreneur, but a lousy marketer of businesses. That is why you need to seek help from professionals for a smooth sale process. For small companies, ‘help’ means working with internet business brokers who will charge a commission for a successful sale.
The work of a broker will be to evaluate the business. After the valuation process, the broker will prepare a prospectus of your business and tap into the market to locate buyers. He will assist in listing your business in suitable marketplaces where he can strike a good deal with buyers.
A good broker will always have excellent negotiating skills, and therefore you are assured of getting close to the evaluated figure for your business.
4. Employees and Suppliers Contracts
Any buyer will want to see a detailed record of employee contracts. Providing a comprehensive list of your employees will help you to succeed in the selling process. Some countries have strict laws that regulate the transferral of employees from one employer to the other.
These laws are aimed at protecting the rights and welfare of workers. Before you attempt to sell your business, make sure you are familiar with the laws that regulate the transfer of employees in your country.
Apart from having a detailed list of workers, it is also vital to have a comprehensive list of all your suppliers. The list should indicate the total amount owed to each supplier. The transfer of a business affects its legal identity, and therefore, any contract with the suppliers must be updated accordingly.
5. Prepare an Operational Guide
Make sure you have a clear guide for the buyer. This will help the new owner of the business to take on the responsibility of managing the business at ease. This can happen only if you have a clear procedure in place that is easy to follow. Always ensure you have a clear manual that a buyer can refer to and follow. Some sales deals also have a hand-holding period where the previous owner sticks around to help the new owner.