Selling your business fast and at a fair market price is the goal of many small business owners. After making the decision, “I want to sell my business,” there is nothing more frustrating than having the market respond or getting very low offers. Understanding the selling process will greatly help you to sell your business faster.
To sell your business fast, follow these 9 steps.
Step 1. Establish Fair Market Price
This is the most important part of selling your business. Because the value of the business is more than just the equipment and furniture and fixtures, determining the fair market price requires detailed knowledge of the market place and what buyers are paying as well as an in depth understanding of your business.
To obtain the fair market price, you will need to contact a business broker or business valuation specialist who values businesses on a regular bases.
To estimate the fair market value, minimally your valuation professional will want the following documents:
- Last 3 years of tax returns
- Current Profit and Loss Statement
- Current Balance sheet
- Copy of Lease
Because small things, like outstanding Daily Deal coupons, can make a buyer walk away, so it is important to be open and honest about your business in order to establish the Fair Market Value.
Step 2. Prepare a Confidential Memorandum
The Confidential Memorandum is a brief summary of your business that answers the key questions that buyers ask. This is only shared with a buyer after they been pre-qualified and have signed a confidentiality agreement. This document drastically reduces the time wasted with unqualified and not serious buyers. Many business brokers will only prepare this document for larger businesses because it is very time consuming and detailed. As the owner of smaller business, your business will sell faster with this document. This is the foundation of your marketing program and basis by which the buyer will evaluate your business. It really is a must to sell fast.
Step 3. Market your business – confidentially
Once the profile of the ideal buyer is determined, it’s time to create a strategic marketing plan to attract that buyer. That could through the internet, paper advertising or direct marketing. With over 90% of the buyers coming from the internet, It is important to leverage the internet as a tool to sell your business fast.
Some brokers will market to 30 sites while others market on over 300 sites. When choosing a business broker, consider their familiarity with online marketing techniques to help you sell fast. If you had to advertise yourself on these sites, without using a broker, you might pay up wards of over $1000 per month and no guarantee your business would sell. This is one area where using a business broker that understands marketing can help you find the ideal buyer faster and cheaper.
Step 4. Screen and meet with qualified buyers
This can be the longest and most intensive part of selling a business. One business can get 20-30-50 calls and each buyer must be taken through a detailed screening process to determine if they meet the criteria of the ideal buyer. This includes a phone interview, financial background check, often a criminal record check, as well as a confidentially agreement. Finding buyers is easy, finding the perfect buyer takes times and profiling skills.
Sadly, when a business owner tries to sell their business them self they fail to properly screen prospective buyers and this can lead to devastating results, both financially and legally.
Step 5. Presenting the business
Once a prospective buyer has been qualified and if required, the seller has approved the person to see the confidential memorandum, then it is time to present the information about the business.
After the presentation, the next step is to qualify the buyer to see if they are serious about buying the business before they ever see or meet you, the seller. This saves you time by only meeting with pre-approved, pre-qualified buyers that know about the business details.
Step 6. Conduct a buyer seller meeting
Once a prospective buyer has been found that meets the criteria, can be financed, has sufficient down payment, and is serious about pursuing your business, it is time for you to meet them.
This gives the you, the seller a chance to meet the buyer and discover their style, attitude, and personality. This gives the buyer a chance to ask more questions. After this meeting, if the buyer is serious either a letter of intent (LOI) or purchase agreement is completed.
Step 7. Negotiations
When selling a business, everything can be negotiated. Deals can be as creative as they need to be in order to meet the needs of both the buyer and the seller. Here are few of the terms that can be negotiated: price, seller financing (down payment and interest), time the seller stays with the business. Who pays commission, and much more. A well trained business broker can assist in structuring the deal so that everyone wins and this is one of the greatest advantages of using a business broker.
Step 8. Due Diligence
After the offer has been accepted, the due diligence period begins. Due diligence is the process of verifying all the important information in the business as pertains to the sale.
The due diligence process should answer the questions:
Should I buy it?
How much should I pay for it?
How am I going to pay for it?
The buyer is responsible for the due diligence process and can take anywhere from a few weeks to a few months or more. If you are offering seller financing this is also the time that the seller is able to perform their due diligence on the buyer. This often includes: inspecting their background, financial position, credit history and more with proper authorization.
Step 9. Getting the deal closed
For professionals that exclusively sell businesses, closing deals is routine. Your business broker should attend the closing with you to assure all the paperwork is correct, all the documents are in place and to answer any last minute questions or concerns. This is not a time to short cut the process. Many deals have fallen apart at the closing table and without a representative to bring it back together, your business might be left unsold.