Selling your small business can be a good business strategy, but this would ideally require a careful financial roadmap. This is because a potential buyer would naturally want to see a positive track record of your business, encompassing the profit and loss streams for at least one year prior to the point of selling it. When you want to sell a small business, you should proceed with careful planning well in advance to make sure that you make a fortune in the end.
Key Planning Steps Before You Sell Your Business
- Get Professional Advice: Make sure that you get adequate professional advice from the right people engaged in the buying and selling of businesses. A lot of legal aspects will be involved in the process, so you should be able to fall back on a professional support system to navigate the complex process.
- Create a Realistic Valuation of Your Business: Focus on what you are bringing to the table. A comprehensive valuation of your business typically involves a lot of key aspects, including capital expenditure, expendable assets, and human resource allocation, among other things. Also, this valuation should be completed from a real-time perspective so that the potential buyer can get a strategic idea on how the business is going to fare in the future.
- Prepare the Documentation in Advance: You will have to make sure that your documentation process is up-to-date. Make sure that you gather all critical documents together and sort them accordingly. This includes financial records, legal contracts, intellectual property documentation, and employee agreements.
- Navigating Vital Legal Nuances: Selling a business would involve a host of essential legal processes that you should be paying attention to. Be aware of your tax implications to negotiate a fair deal structure while selling your enterprise. You must consider setting up Non Disclosure Agreements (NDAs) to protect sensitive information in this process.
Planning Ahead to Maximize Value
You will have to invest in a set of essential strategies to maximize the value of your business. To start with, you should ideally diversify your business management to a team, rather than keeping it all concentrated on yourself. Traditionally, if a business is heavily dependent on the owner, the risk assessment for the buyer can border in the critical zone. Creating suitable SOPs to navigate these challenges should be essential in democratizing the process, while making sure that you can get a fair deal.
Focus on your customer relationships. The buyer would naturally expect a loyal, pre-existing customer base, but this is not a unidimensional dynamic. Depending heavily on a single customer can be extremely risky because that can drastically reduce the value of your business if the customer is looking for an exist. Ideally, no single customer should account for 10-15% of the total revenue. Also, you should invest in the protection of your Intellectual Property, as this can significantly increase the valuation of your business.
Finally, you should have a smooth exit plan with everything arranged categorically. A well-documented exit plan is highly appealing to potential buyers as this can minimize the risk assessment in the business dealing.
