Next Steps After You Have Decided to Sell Your Small Business

You’ve decided that it’s the right time to sell your small business—so what next?

Selling a business can be overwhelming, especially if it’s your first time doing so. Between the logistics, the timing of the sale, and a whole lot more, there are several factors to consider before you complete the sale.

This post will guide you on the next steps to take after you’ve decided to sell your small business.

Understanding the Reasons for Selling 

The first thing you should do is to determine the reasons behind your decision to sell. Are you selling to take advantage of the increasing traction of small business acquisitions? Are you selling due to a divorce or health reasons? Or is the sale part of your exit strategy? 

Whatever the reason for selling the business, ensure the benefits outweigh the drawbacks. You don’t want to run losses on the sale or regret selling your business later on. 

Preparing the Business for Sale 

How you prepare your business for sale will determine how much you get for it. That said, if you want to sell your business at a competitive price, here are the three things you should do when preparing it for sale: 

Conduct a thorough assessment of the business

Review all the critical aspects of your business, including your product or service, financial data, key performance indicators (KPIs), and your competitive unique selling point. The assessment will help address preparedness issues before putting up your business for sale. 

Identify areas of improvement and make the necessary changes.

During the assessment, identify the areas of your business that need improvement. Make the necessary changes to these areas to maximize the value of your business and to ensure a successful, profitable sale. 

Gather all the necessary financial and legal documentation

The financial documents you’ll need to gather include: 

• Personal financial statement (to be completed by the buyer)
• Internal profit and loss statements (dating back 2-3 years)
• Balance sheet
• Accounts payable reports
• Corporate tax returns (dating back 2-3 years)
• Discretionary cash flow and earnings
• Escrow agreements. 

The legal documents you’ll need to gather include: 

• Current lease agreement
• Enterprise insurance policies 
• Employee agreements 
• Letter of intent 
• A non-disclosure confidentiality agreement 
• Business professional certificates
• Existing client/vendor contracts 
• Offer to purchase agreement 
• Post-closing agreement 

Valuing the Business 

Understanding what your business is worth can help put a number on the endless hours of hard work and the investments you’ve made over the years. There are several methods you can explore to accurately value your business, including market capitalization, earnings multiplier, times revenue method, book value, discounted cash flow method, and liquidation value. When valuing your business ensure that you explore factors that may impact its value, including competitive advantage, growth prospects, location, reputation, and earnings history. 

If need be, you should engage a professional appraiser when valuing your business. 

Finding Potential Buyers 

You’ll need to develop a sound marketing strategy for attracting potential buyers. For instance, you could post your business on online listing sites and local listings. You could also generate excitement about the sale of your business by spreading the news by word of mouth. Talk to other business owners about selling your business. Head to tradeshows and meet-ups where you can talk to potential buyers. 

Another excellent way to find potential buyers is to engage brokers and other intermediaries. A broker can not only help you find potential buyers but can also offer vital advice on what to expect during the sales process and ways to devise your marketing strategy. 

Whatever marketing strategy you decide on, ensure you prepare a sales package and marketing materials to showcase the business. 

Negotiating and Closing the Sale 

You’ve received offers from potential buyers. Now it’s time to negotiate the sale. 

Evaluate the various offers from potential buyers to determine the ones that pique your interest. Negotiate these offers to ensure you get the best value for your business. 

After settling on a potential buyer(s), conduct due diligence to confirm the buyer’s ability to finance the sale. Finally, prepare all the legal documents and finalize the sale. 

Post-Sale Transition 

How a seller gets involved in post-sales transition will vary from one deal to another. However, for most sellers, the post-sale transition often entails: 

• Communicating with employees and customers: You should make the post-sale transition period as seamless and worry-free as possible for your customers and employees. Meet with your employees and customers and inform them what they can expect from the new owner. You’ll also want to communicate with vendors and suppliers to inform them of the change. 
• Address any outstanding financial and legal issues: You don’t want to transfer your legal and financial obligations to the new owner. As such, you’ll want to settle those issues to ensure they don’t jeopardize the sale. 
• Move on to the next chapter and consider new opportunities: Use the money you received from the sale to address the issue that prompted you to sell in the first place.  You could also use the money to start a new business venture. 

By following the above steps you’ll sell your business successfully at a competitive price. 

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