Selling your business can bring financial rewards. But to get the best price, you need to minimize red flags to potential buyers and maximize the value of the business asset you have created. Before you sell, figure out how to best position yourself within the market and prove that your business is a good investment to prospective buyers. And be sure to keep these steps in mind when approaching the task:
Assess your value. Your asking price should reflect your business’s actual—not just potential—value. Most buyers won’t take a risk on a potential value. They want to see proof of value, not possibilities. Proof of value comes from things like recurring revenue, a team that can lead itself, not depending on you, and a history of increasing profits and independence.
Maximize your profits. Potential buyers will be paying close attention to your business’s actual profits. Touting your revenue is informative, but it doesn’t provide the information an investor needs. Look at your profits, and see if there is anything you can do to boost them before you sell. If you’ve been managing profits from a tax perspective, and making them appear as small as possible, you may want to shift this for a few years pre-sale.
Verify and backup your numbers. Potential buyers will want to see invoices and proof of deposits or account activity. Your tax returns aren’t enough. To do this, you’ll need to get your business’s finances in good shape before you sell, which means updated P&Ls with income and expenses broken down and categorized properly, plus future projections.
Focus on the present. Your past financial performance may be relevant, but you can’t base your asking price on past profits. Buyers typically want to see how your business has performed in the last 12 months. Be prepared to provide ample proof of that.
Prepare for transparency. Full disclosure when it comes to your business’s shortcomings is crucial to a good sale. In fact, this is one area that keeps many sellers from getting top offers. Buyers can quickly be turned off if they suspect you are less than forthright.
Get to know your business. Buyers will ask you a lot of questions, both big and small. Be prepared to answer them professionally and honestly before you put your business on the market.
Selling your business for the price you deserve doesn’t happen overnight and working with a trusted advisor will maximize your advantages—and your asking price— before putting your business on the market. Obtaining legal guidance and planning before you sell will help you reap the best offers for your hard work.
This article is a service of Law Office of Benjamin Diederich, centrally located in Southwest Riverside County, in the city of Menifee, and serving the surrounding cities of Murrieta, Temecula, Wildomar, Lake Elsinore, Riverside, Corona, and around the country. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a Business Protector Audit℠ for new or ongoing businesses, which includes a review of your legal, financial, insurance, tax, and intellectual property foundation to ensure your business operates in a sound manner. Call us today to schedule your Business Protector Audit and mention this article to get this $750 session at no charge.