It takes a lot of time, money, and patience to build a successful business. And for some entrepreneurs, once they reach a certain threshold of success, they will start thinking about selling their business. In many cases, it may seem like the next natural step in the business cycle.
So what do you need to know before you take the plunge? To find out, we asked members of Young Entrepreneur Council the following question:
Q. What is the most important thing to keep in mind when deciding to sell your business?
1. The market
You could list your company for the perfect price, and if it’s not a buyer’s’ market, you might find yourself having to reduce the purchase price, just to sell during a season where investors aren’t ready to place an offer. Selling your company at the wrong time could cost you thousands, maybe even millions of dollars. —Patrick Barnhill, Specialist ID, Inc.
Potential buyers are quick to find whatever a business is lacking. It is important that you identify any issues and fix them before you attempt to sell. If that isn’t possible, then point out problems and offer ways to address any negative issues. Hiding flaws can blow up a deal, and acting like you don’t know about them will ruin any future deals with a buyer. It is best to be honest and upfront. —Blair Thomas, eMerchantBroker
The best way to scare off a potential buyer is to have tons of debt. No one wants to buy into debt; they want to invest. Reduce your debt as much as possible to make potential buyers believe that they are investing in a profitable company—not a money pit. —Codie Sanchez, www.CodieSanchez.com
4. Document preparation
Before approaching a company that’ll represent you, make sure you are totally prepared. It’s not just the obvious financials, but also information such as “succession planning,” which is documentation that goes over the roles of each member of staff, exactly how they do their jobs, and how they run their divisions. Being ultra-prepared is less stressful and also impressive from the suitors’ standpoint. —Alex Miller, Upgraded Points
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5. Post-sale requirements
Depending on the terms of the sale, you may be required to stay on as an advisor, employee, or consultant for a period of time. The acquired business may need your help during the transition phase. Are you willing or prepared to stay on and work for a business that you just sold or are in the process of selling? —Shawn Schulze, Names.org
6. Brand linkage
If you’re selling a SaaS business, you’ll want to pay extra attention to churn. Are you customers leaving your service at a faster rate than you are gaining new ones? If so, figure out why, and try to fix the issue before you sell. —Syed Balkhi, OptinMonster
8. Next steps
Be introspective and think about what you really want to be doing, personally or professionally, and have it figured out before you decide to sell. We decided not to sell our company last year as we were having so much fun. For us, the money wasn’t worth it if we were already doing what we wanted to be doing. Have a plan, have a passion, and go from there! —Dan Golden, BFO (Be Found Online)