Selling business entities is not as easy as people think. We hear lot of good news about entrepreneurs selling their small business ideas to big companies, for millions of dollars, but is it really that simple to become a millionaire? More than 60% of small business owners plan to sell their ideas within reasonably short time. This trend leads to increased number of companies that are on sale, which can result in flooding the market and lowering the overall worth of businesses. In spite of this gloomy-sounding statistics, we can still find hundreds of successful entrepreneurs who monetize their business in the right way. Here, well write some of the things all small-business owners should have in mind when trying to sell their company.
Plan Exit Strategy from the Day One
Many entrepreneurs wait too much when it comes to selling their business. They usually do it when some catastrophic event occurs, which can further cut down the companys price. Many companies are trending down at the moment of their sales, and theyre not as profitable as they were before. Business should be sold when its doing great, and thats the time when the sale will bring the biggest amount of profit to the owner.
Paying Off Debts and Getting Books in Order
Companys books are usually the first thing corporate attorneys are going to lay their hands on. All entrepreneurs want to decrease their tax liability, and theres nothing wrong with that. For this purpose they often run various company expenses as personal ones. Thats why it is important to dig deep and know the numbers, before contacting possible buyers. Good way to fix all these small book irregularities is by hiring an accountant to check the books, and he/she can also evaluate the deal terms during the selling process. Entrepreneurs can also give this job to company accountants, but this is not advisable because many accountants wont support the owners decision to sell their business which can lead to big conflict of interest.
When it comes to debts, even the good ones are bad when it comes to selling the company. Entrepreneurs who think about selling their business from the start are mostly using short-term debts and term loans. Buyers will only pay for what the company is worth to them, and any kind of debt will cut down the companys price.
Who Goes and Who Stays?
Corporate buyers like businesses in which business owner is not the crucial figure. This fact often messes with the minds of successful entrepreneurs who are used to sacrifice everything for their business to grow. People who want to sell their company should know that they would be much better of if they simply forget about the company they sold, and devote themselves to some other projects.
When it comes to staffing, lot of company owners hire their friends or relatives to work for them. Corporate buyers have their own ideas about the company management and they are definitely not going to tolerate any kind of nepotism in its ranks. If certain employees are not skillful enough, theyre definitely going to be replaced during the post-transitional period and keeping incompetent people on the companys payroll may make purchase price lower, since firing all unskillful workers and replacing them with interns can create large costs for the buyer.
Hire a Broker or a Business Consultant
Business advisory services are not only good for running the company, but also for selling all of its assets. Consultants are hired for their experts opinions that can be very helpful when it comes to reviewing offers from various companies. There are also business consultants and brokers who are specialized in selling companies and these people might have long lists of corporate entities that might be interested in buying the small business in question. They cooperate with lot of small and big businesses and work on connecting these two sectors on mutual benefit.
People sell companies for various reasons, and in any case selling business to a bigger corporate entity is a good chance to invest this money to some new smart projects, and also to relax from the every-day work-related stress.