Some people start businesses with the specific intention of eventually selling them. Others decide that they would like to start a new endeavor or receive offers that they believe are too lucrative to ignore. Regardless of why someone decides to sell their business, there are many challenges that could arise during the sales process.
Selling a business that someone has developed through an investment of time and money requires a cautious approach to ensure an appropriate return on those investments. There are certain special considerations that can impact the success of a business sale. What factors will an owner need to consider carefully before accepting an offer or (ideally) listing a business for sale?
Establishing a fair market value
A company is worth more than just the current resale value of its equipment. People need to know what an organization is worth to negotiate a sale price. There are many different approaches to business valuation that look at factors ranging from the value of current contracts to the impact of a company’s reputation on consumer behavior. Learning about different means of business valuation can help business owners choose the right option and ask an appropriate price for the business that they own.
Addressing transition support needs
Someone taking over a business will inevitably experience some challenges. Those challenges may range from conflict with certain employees to difficulty adjusting to a different industry or market. One of the best ways to ensure that the company remains successful and solvent when a new owner takes over is to offer transitional support as the former owner.
Many owners and executives will offer anywhere from one to six months of transition support, sometimes more. During that transition, they may continue working full-time at the business, communicating with clients and training their replacement to ensure that the company remains viable after their exit.
Identifying and eliminating liabilities
Whenever possible, it is best to list the company for sale in optimal condition. Doing so may require making updates to the facilities or repairs to machinery. Business owners may also want to address financial liabilities by paying off certain loans. Other times, the biggest liability may be the risk of workers leaving when ownership changes hands. Some owners even negotiate contracts with their workers and clients to minimize the disruption to the business when the new owner takes control.
Having a rational, measured approach to the sale of a business can help optimize profits for the owner and make the business opportunity as enticing as possible for prospective buyers.
