Planning is always important when it comes to your business – even more so when you plan to sell it.
What you need to know about the planning process before selling your business
The importance of planning in an organization doesn’t stop when it’s time to sell – if anything, it may get more important, as a business sale can potentially affect the rest of your business dealings, whether it’s retirement or funding your next project.
There are many reasons a business owner might decide to sell their business. Some find that they no longer have the passion they once had for their concept or they might want to spend more time with their families and sell a successful business to someone else to profit from their hard work. Some business owners choose to sell when they retire.
Whatever the reason for selling, it is very important to understand that selling an entire business is very different than selling a product or even a house and, like all parts of a business, it requires careful and steady planning.
1. Considering your timing
If walking away with a hefty valuation of your business is important – maybe you want to retire off the sales proceeds – you need to pay special attention to timing. Understanding how the market moves and flows and how it’s primed to respond to your putting your business up for sale is a key consideration before deciding when to sell.
2. Start planning early
Executing a successful merger or acquisition is not like putting your house up for sale. A business is much more than just the walls that it functions within. The process can take years to successfully close. You’ll need to start by gathering up to 5 years’ worth of important business documents, including tax return statements, receipts, expense reports, and payroll records. Having all your documents in order early on helps you with buyers down the line.
3. Know who you need on your team
There are key players in every business sale. You’ll need to work with an accountant and attorney to ensure that the transaction goes smoothly. Having the right people in place – even if their services cost you money – can help you save time and money down the line, ensuring that you don’t make any major missteps that would damage you financially or socially. Getting professionals involved earlier can be a huge asset.
4. Consider your value
What are the attractive qualities of your business that would make it more likely to sell? Do you have a prime real estate location? Patented technology? A loyal customer base? These things should be considered and understood before beginning the sale process.
5. Communicate
The importance of communication – and planning all the people you’ll need to have crucial conversations with – is paramount. You’ll need to tell your employees, for instance, and consider anyone under contract. You’ll likely need to communicate with your customers that the business will be under new ownership. You’ll need to communicate with everyone in your supply chain – from the people who manufacture your product to the people who help you distribute and deliver it, plus anyone you have a procurement contract with for supplies and services at your building. It’s important to communicate early and communicate often throughout the process.
6. Have a valuation done
Having a professional team with business sale experience and having all your documents accessible, plus having a communication plan in place, will all set you up for the first major step in listing your business for sale. Planning your valuation helps set your whole business sale strategy in motion by helping understand the value of your business assets.
When it comes to selling your business, the importance of planning is crucial. It helps business owners have peace of mind about the future of themselves and former business, plus helps to make the entire transaction process smoother.
