Selling a business implies consistency and responsibility at every stage. In this article, we will tell how to choose the right time for a deal, assess its cost and risks.
Why do you sell your business?
Selling a ready-made business is a common practice in the business environment. Entrepreneurship is an integral part of the lives of many people. And the idea that the company may pass to another owner is very disconcerting. So, if this is your final decision, then you must thoroughly prepare for this step by creating a checklist for selling a business.
Why do people decide to sell their company? For psychological, economic, or organizational reasons. The owner of an enterprise can take such a step for various reasons: for example, because of unprofitable production, a desire to switch to another industry, or completely change the type of activity. In any case, the founder is faced with the difficult task of finding a buyer, which should be approached with the utmost responsibility.
So, the M&A market, like any other, has supply and demand. A strong and promising business attracts many buyers. Fading and problematic – it can go bankrupt, and its assets will be dismantled cheaply by competitors. Thus, it is better to have a well-organized plan.
Currently, there are two main ways to sell a business: closed and open. In the first case, the owner is looking for a buyer on his own or with the help of an intermediary. In the second, information is posted on specialized sites, in social networks, or business media and is not hidden from the organization’s employees, suppliers, and customers.
What is the best way to sale a business?
The checklist of selling business includes the following procedures:
- Due diligence procedure
If you decide to sell your business, you will need to back up your beliefs with facts so that potential buyers will also decide that buying your business is the best option on the market. To do this, you will need to assess your assets, liabilities, workforce, and business processes. On average, the duration of such an audit is from one to three months. To conduct it, you need to hire a third-party company that specializes in this.
- Determining the price and structure of the deal
Before deciding on a price, you need to define the structure of your company and decide how you will sell it. Depending on what your company is made of, you will need to build a legal structure for the deal. You will need to decide what, when, and at what price you will sell. At this stage, you will also need an experienced legal professional to help you implement such a transaction.
Once you have decided on the structure of the deal, you need to decide how much your business might be worth. Here you need to competently approach the issue since too high a price can scare away buyers.
- Buyer search
After you have decided on the value of your business and decided exactly how you will sell it, you need to decide on the reasons for the sale. Each potential buyer will ask you why you decided to sell your brainchild. Depending on your answer, a potential buyer will either be interested in your offer or run away. Quite often, business appraisal companies help with the search for buyers.
- Signing an agreement
At this stage, the main thing is the security of the transaction. There should be a clear flow diagram of funds, documents, and assets.