How To Sell A Business In the USA

Selling a business is one of the hardest decisions you may have to make as an entrepreneur. It can be difficult if you don’t know why you are selling, when you are going to sell, and how will you sell your business. If your business is based here in the USA, and you’re thinking of selling it, we can help you with that.

This guide will help you navigate the ins and outs on how to sell your business and how to avoid making the wrong decisions.

What’s Your Reason? 

The first thing you need to determine is your purpose for selling your business. If you are selling it because you feel tired and you want to just relax, check yourself if you need a short break or if you need to let go of it completely.  

Some people think they need to step away from the business completely, but they are shocked that after some time, they miss the daily hustle. You can try taking a vacation for a while with your family and see if your mindset is back to normal after you come back. Other possible reasons are bad financial situations, or partners are buying you out.

Try talking with people who have sold their businesses and ask them if they regret their decision or if they are happier after selling. Look at their perspective and check if it is the same as yours. By doing this, you can learn more about your situation and avoid making the wrong decision for you and your business.

Determine the Buyer You Want 

Choosing the right buyer for your business should be your next priority when you are prepared to sell your business, and the time to sell your business is right now. There are different types of buyers, and you should be careful how you deal with each of them.  

Some buyers are interested in your business, but they don’t have the money to buy your business. There are also some buyers who have lots of money but don’t have a sliver of interest in your business. You can also encounter people trying to gain information about your business but is not interested at all. Lastly, the one you want is the one with money, interest, and wants to deal with you for your business.  

Try researching and studying the available resources from the Small Business Administration or the National Federation of Independent Business. These can guide you on how to sell your business properly. 

What’s Next?

After everything has been determined, the next part of selling your business is the nitty-gritty of selling a business, preparing your business for the sale, and negotiating the terms of sale. If you need help on how to sell a business, you can always consult professionals like mergers and acquisitions bankers, and lawyers so you have more knowledge about it and since you need them if ever you proceed with selling your business.

When Is The Right Time To Sell Your Business?

Selling a business is a difficult decision. What leads to the decision to sell can be different for each person. You may want to sell your business due to bigger opportunities through a merger. You may think that it is time to move on to another industry. Or you might be interested in selling because you want a complete change in your career path. Whether you are selling for business or personal reasons, a common question that comes with the decision is this, “When is the right time to sell your business?”  

Here are some factors you must consider before selling your business. 

Timing is Everything

How important is timing in selling a business? Well, it can make or break your deal. You want to sell your business for the best possible price that you can get. After working to increase the value of your business, you would want to be able to sell it at a profit as well.  

So, what is the preferred time to sell a business? The best time to sell your business is during its growth stage. This means that your business had already passed the pre-growth stage when you were still figuring things out. During the growth stage, your business should be experiencing a steady increase in annual revenues and profits. 

When is the right time to sell your business? Well, it’s all about the timing. Businesses with growth trends over several years are attractive to potential buyers. You must seek a professional valuation of your business to help determine the right price to sell. 

The Market is On An Upward Trend

Aside from considering growth trends, when is the right time to sell your business? How the market plays out is a huge factor when deciding to sell your business. Is your industry currently booming in the market? How are the stocks? Have there been a lot of acquisitions and mergers? 

These are all market factors that you must consider before selling your business. Ideally, buyers would want to acquire a business that has a lot of upsides in the market. If your business has performed well compared to industry and market statistics, it has a lot of value that buyers will be interested in.

You are Looking For a Change of Scenery

The third factor, and arguably the most important, is how you feel about selling your business. Are you looking for a break from your business? Do you want to move on to a different industry? Have you planned your next steps in your career and personal life? 

A lot of business owners have sold their businesses due to career and lifestyle changes. Some have also sold because of burnout and lack of motivation. Determining why you want to sell your business is equally important with knowing when is the right time to sell your business. You need to considering market trends and the right time to sell as well as your reasons. Once you are decided on selling your business, it will be a lot easier to find the right buyer who will continue to value and grow your business as you have. 

How To Prepare To Sell Your Business

Starting up a business is a big leap of faith. It is always risky, and not every business will always result in success. Every business owner must be prepared for this worst scenario and should not be ashamed of facing this situation. Being prepared will always save you from business losses.

One of the most common options to avoid a huge business loss is to sell your business. This article will be a helpful reference to know how to prepare to sell your business. 

How Will You Know if it is the Right Time to Sell Your Business

Some business owners are trying to hang on with running up their business. Having the assumption of getting back on track, they did not notice that it would only lead to a worse situation. Here are the things to consider to know that you need to sell your business:

Your business is not hitting up the target

Businesses always have their daily and monthly target sales. Target sales are one of the parameters used in assessing if your business is doing well. If you think that you are not hitting up at least 70% of the target sales, guess it is time that you need to review your business performance. 

You are falling into lots of debts

Borrowing money to start a business is fine because you can pay for that borrowed money once you start earning. But if you notice that you are more on borrowing money to survive your business, that is the time that you need to accept the fact that your business is not working anymore. You may consider starting to look for business buyers. 

You are losing your interest 

It is for sure that aside from your business, there are also times that you are struggling to build up yourself and also experiencing personal struggles. If you notice that you are not having the same energy and passion with what you have started, you may try to take a pause and reflect if you still want to continue, if you need a rest, or if you need to look for someone who wants to buy and continue your business. 

Consult a business expert to help you with how to prepare to sell your business.

What are the Things to Prepare in Selling Your Business?

Most business buyers are meticulous when it comes to putting their money into the business. Do not be surprised by this because it is a usual approach. To avoid hassle and too many questions, you should be prepared with the following: 

Prepare Your Legal and Business Papers

When you are planning to sell your business, the first thing that you should put on top of your list is to prepare and organize all your legal and business papers. Your business permits, incorporation papers, vendor contracts, and so on must be ready and in order. 

Know the Value of Your Business

Another important step you should take when you plan to sell your business is to know the worth of your business. It can give you an idea if you can sell your business at a high price or if your business is low value. Visit an expert to get a business valuation. It is best to go to an expert so they can provide you a detailed report and explanation about the value of your business. It will also increase the credibility once you presented it to the buyer.

Prepare The 3-5 Years Financial Records

Yes, you should be prepared with the past 3-5 years of clean financial records of your business. Why is that long? Here are the reasons why you must present clean financial records: 

How Can You Keep on Track with Your Financial Records? 

Here are some of the tips to ensure that you keep complete and clean financial records:

How To Do A Business Valuation 

Putting a price on your valued business is a dreadful task, especially if your purpose is putting it up for sale. However, this action might be a crucial step for your career. If something is valuable, it should be worth more! But that is not usually the case, especially if you are planning to sell it. Selling your business is a huge financial transaction.  

You need to know how much your business’s worth is. Most certainly, you need to know how to do a business valuation before putting a price on your most valuable asset. If you’re planning on selling your business, this article will share the best three ways valuation methods and when to start selling your business. 

Business valuation is a method/process of determining the economic value of a business. To settle a common ground between both parties, a business valuation can be utilized. For the business transaction to be worthy and profitable, you need to understand how to do a business valuation on different business valuation methods. 

Here are 3 known valuation methods to guide you to the right price for your business. 

Asset-based Approach 

An asset-based approach is a valuation method that estimates the price/value through its total number of investments. This method can be approached in two ways:

  • A going concern asset-based approach reviews your company’s balance sheets, lists your company’s total assets, and subtracts its total liabilities.
  •  
  • A liquidation asset-based approach will determine the liquidation value/net cash from your company when all assets and liabilities were sold and paid off.
  •  
  • This approach works best on corporations where the assets owned by the company are also part of the business’ sale. 

Earning Value Approach

Another way on how to do a business valuation is through earning value approach. This process determines business value through their ability to produce wealth in the future. This method can be classified into two approaches: 

  • Capitalize earnings – using the company’s previous records on their past earnings, normalizing them, and then dividing annual income through a capitalization rate.
  •  
  •  
  • Discounting future earnings – instead of using the company’s past records, this method focuses on its future cash flows, then divides it with the same capitalization rate. 

Market Value Approach

The market value approach establishes business value through comparison with similar companies that are recently sold. This valuation method only works best when there are enough companies to be compared to. 

Every business owner has it differently. Circumstances may vary but choosing the right valuation method can determine the direction of your business and sales. Make sure to pick a suitable method in selling your business. Commit yourself to find the perfect buyer who will buy your business at the right price. Sell your business for its worth and turn your most valuable asset into their most valuable asset. 

How To Negotiate The Sale Of Your Business

When it comes to selling, negotiation is one thing that you should bear in mind. Knowing how to negotiate the sale of your business will help you build a better relationship within the business world. It can also be the key to a smooth transaction. So, if you are planning to sell your business, you must learn how to negotiate in business. 

There can be a few reasons why business people need to sell their business. Most of the time, it has nothing to do with failing financial status but rather a better opportunity or a desire to venture to a new avenue. For some, it could be reducing risk, especially when they are handling quite a few business lines. So, whatever reasons you may have in selling your business, you have to make sure you are set to negotiate it the right way. 

Below are some ways to negotiate the sale of your business. 

Getting the Business Ready for Sale

You must know your business very well to ensure accurate answers to the buyer’s questions when negotiating. Know the market value of your business’s assets. You must learn its financial records, including the audited ones. In this way, the buyer will understand what he can gain from buying it and the things he needs to do to keep it afloat and be more profitable. You may discuss the process flow of your business, the technology involved, and the executive team. When you have all the information you need, it would be easier for you to provide your proposal. Once you have set the price, you can figure out how far you can make adjustments once you enter into the negotiation. 

Be Ready to Negotiate

Before you get into the negotiation, make sure you have the buyer’s letter of intent with its proposal, so you can be ready with your counter-proposal when needed or match it with your set price. If you have a sales advisor, he will let you go through the process on how to negotiate the sale of your business. Your advisor can also provide you with legal and accounting advice, especially regarding the structure of the sale and its price allocation. You must also be ready with the issues that need to address. 

Be Clear with the Details of the Sale

There is a possibility that the buyer will not know what is offered for sale. Is it a part, or is it the entire entity? Make sure you make it clear with the buyer to avoid further confusion. Knowing how to negotiate the sale of your business must include precise details of what you are willing to sell. 

Know your Buyer

No negotiation can be successful if you don’t know your buyer. Knowing how to negotiate the sale of your business is knowing the buyer and understanding who you are talking to and how you can talk to them. When you know your buyer, you can position your proposal based on what they need or why they need your business, and this will lead you to a successful sale. Knowing your buyer involves his capability to pay and his true interest in buying the business. The buyer’s interest can be a good selling factor. You can get the other party to agree with your offer.

Do You Need A Business Broker To Sell Your Business?

Whether you are a small or big business owner, there comes a time when you must make a huge decision to sell it off to a new owner that can continue your business or transform it into something better. How do you know if you are selling it at the right price? This is the perfect time you ask yourself, “Do you need a business broker to sell your business?”

This section will help you learn more about business brokers, the advantages of getting one, and how to find the right one for you. 

A business broker is usually called a “middle man” or a “buffer” between you, the seller, and prospective buyers. They are the bridge to an effective sale of your business. Business brokers are knowledgeable of the stock market, and they are experts on what paperwork to file to make each deal go smoothly. Having an experienced viewpoint from a business broker will help you realign your price in selling your business.

Benefits of Hiring Business Brokers

You may still have second thoughts on hiring a business broker. You sacrificed your time and money in investing in your business, and it might be difficult to trust someone else to sell it for you. Do not worry, as business brokers are efficient and professional when it comes to work and business. Here are a few advantages if you hire one. 

Effective Pricing

One can only get so trigger-happy in hiking up the selling price of one’s business; however, too high a value may put off interested sellers. You would not want that. So, this is where the advantage of getting a business broker comes in. Business brokers have the right connection where they get their market data sources that are surely reliable. With this, they can help you set a fair price for your business. Besides, you deserve the right price for all your hard work! 

Confidentiality

You might be worried that once you put a “For Sale” sign for your business, people will flock and ask for information. You do not have to worry about for confidential matters to leak. Business brokers are “buffers.” One of the ways done by a business broker is to get a prospective buyer to sign a non-disclosure agreement before sharing information about your business. 

Professional and Quality Marketing

A good business broker takes time to study and create an effective and efficient quality “Comprehensive Business Review” or CBR. This outlines all the crucial details of your business. Also, a well-trained business broker has the expertise and knowledge on how to effectively market various business opportunities to attract numerous prospective buyers. You can ask for a sample of a CBR if you plan to hire a business broker. 

Timesaving

Having a business broker managing the selling of your business will give you more time to run it without worrying whether there are buyers. Being a businessman, there are other things to do as well, not only running the business. You can even enjoy your time with your family and friends while the broker handles things professionally. 

Finding A Business Broker

So, do you need a business broker to sell your business in the market? It all depends on you. Two tips in choosing a business broker—first, make sure you two have great chemistry, meaning your communication is constant and well. Second, always check newspaper ads, yellow pages and even ask for referrals. Find the best business broker that can negotiate on your behalf and seal the deal professionally.

Experience

Finally, business brokers rely on their years of experience to anticipate the pros and cons of a potential business deal. They can check if there will be a potential problem that you have to deal with before a negotiation is sealed. Business brokers can give you the best advice.

Are Business Brokers Costly?

Another thing to consider if do you need a business broker to sell your business is how much a business broker charges for his services. Usually, it is 5-12% of the business price. However, business brokers in different States have a fixed commission rate of $12,000 to $15,000. There can also be upfront fees that depend on the deal or business being sold, and it ranges from $2,000 to $20,000. It may look too pricey, but for one to sell a business properly and successfully, a business broker is the best solution.

Find Businesses for Sale in Your Area!