Introduction
If you’re ready to move on to a new chapter in your life or if you want to take advantage of a hot seller’s market, here’s what you need to know about selling your business for top dollar:
According to the Small Business Administration, only about 50 percent of small businesses survive their first five years.
According to the Small Business Administration, only about 50 percent of small businesses survive their first five years. As you can imagine, this is a pretty high failure rate for all entrepreneurs and business owners who have put so much time and effort into building their companies.
However, if you can make it past that first five years, your chances of making it longer are much higher. According to one study by Forbes magazine, 60 percent of small businesses survive more than 10 years in operation—and 80 percent are still around after 15 years!
It’s also worth noting that most businesses don’t fail because they aren’t profitable or successful; they fail because their owners lose interest or get bored with running them (or something else happens). That’s why it’s important not just to try new things when you start out but also keep exploring new opportunities as your business grows.
If you’re ready to move on to a new chapter in your life or if you want to take advantage of a hot seller’s market, here’s what you need to know about selling your business for top dollar.
- Understand the market you’re selling in. A good broker will help you understand your business and its value in relation to similar businesses in your area. They’ll also know where there is opportunity for growth and how best to capitalize on it.
- Use a professional broker who has experience with the type of buyer or investor that would be interested in acquiring your company. A good broker can guide an inexperienced entrepreneur through all of the steps required when buying or selling a business so that they can put their focus on running their company rather than worrying about getting it sold at top price.
- Be prepared to negotiate. The final sale price of any business depends heavily on several factors including: size; location; industry; competition level within geographic area served by organization/company being sold; earnings trends over time period since last sale occurred (recently vs further back); potential upside.
1. Choose a professional broker.
The first step is to make sure that you have the right broker for your business. A professional broker will have many years’ experience selling businesses in your state and industry, as well as a strong track record of helping others sell their businesses for top dollar. They should be able to give you an unbiased view of what other companies like yours have sold for recently, and can help determine if there are any gaps in this information that would affect your sale price or timing. In addition, they’ll also have some contacts with potential buyers (if they don’t already know some) who might be interested in buying your company.
A good broker will have many years’ experience selling businesses in your state and industry, as well as a strong track record. They should also have some contacts with potential buyers.
2. Build up your business’ value before you sell.
Now that you’ve decided to sell your business, it’s time to see if anyone is willing to pay what it’s worth and make a deal. This can be tricky because there are many factors involved in determining its value—and those will vary from business owner to business owner and industry to industry. But there are some simple ways for any entrepreneur with a small or mid-sized business (upwards of one million dollars in annual revenue) to increase their company’s potential worth:
- Reduce expenses by outsourcing labor-intensive tasks such as bookkeeping, payroll management, data entry and administrative work so that more money goes into growing the company instead of paying for day-to-day operations at every level.
- Invest in systems that help streamline key processes like sales funnels or ordering so that employees spend less time on administrative tasks while keeping customers happy by delivering faster results on their requests.
There are several ways you can increase the value of your business before putting it on the market:
There are several ways you can increase the value of your business before putting it on the market:
- Reduce expenses and overhead. You should aim to reduce expenses in every area, including marketing, payroll and the cost of goods sold. Keep in mind that this will likely mean a reduction in staff or hours worked by existing employees, but it’s better to trim costs than take a hit later on when you sell (and even if your company is profitable now).
- Outsource or automate services that aren’t core to your business. The more tasks you can delegate, especially those tasks done by employees who could be replaced with technology or outside help instead, the more money you’ll have left over for other projects—like investments that could boost profits after sale time comes around again!
- Get a valuation for tax purposes. If possible (and legal), consider getting an independent valuation from an accounting firm before listing with any brokerages or agents; this will help establish a baseline for negotiations later down the road as well as provide some proof that there was indeed demand for such services/products already happening before trying to sell off everything all at once rather than just focusing solely upon new startups looking into buying out existing companies altogether instead!
– Reduce your expenses by lowering overhead and debt, as well as any costly monthly bills or subscriptions that aren’t directly related to your product or service.
Reduce your expenses by lowering overhead and debt, as well as any costly monthly bills or subscriptions that aren’t directly related to your product or service. A few examples of monthly bills that aren’t directly related to your product or service include:
- Internet access
- Utilities (gas, electric, water)
- Cable TV/Satellite TV/Phone service
– Outsource contract work and hire part-time employees rather than full-time staff members; this will lower your payroll costs while maintaining consistency in the quality of work you deliver.
Outsourcing contract work and hiring part-time employees rather than full-time staff members is a great way to save money on payroll costs while maintaining the quality of the work you deliver. Hire contractors for certain tasks such as website development, marketing campaigns and accounting jobs. If you need help with office tasks like administrative work or data entry, consider hiring a part-time worker instead of giving someone full control over your company’s finances.
– Reduce reliance on yourself by investing in systems that remove manual tasks from your daily routine, such as automated appointment reminders, social media scheduling tools and cloud-based software for invoices and accounting purposes.
- Reduce reliance on yourself by investing in systems that remove manual tasks from your daily routine, such as automated appointment reminders, social media scheduling tools and cloud-based software for invoices and accounting purposes.
- Outsource non-essential tasks to freelancers who can work remotely at a fraction of the cost of hiring full-time staff members or building out your own in-house team.
- Hire part-time staff rather than full time employees if you don’t need constant coverage or their skills are only required on an occasional basis (e.g., seasonal workers).
3. Get an accurate business valuation for tax purposes.|
The value of your business depends on many factors, including:
- How much money you have invested in the business
- How much money you make each year
- How much money you have in assets (property, equipment and inventory)
- How much money you have in liabilities (debts and other liabilities)
The following formula can help give you a better idea of how to sell your company for the highest price possible:
Value = Net Profit x Capital Invested + Inventory – Debt
Conclusion
If you’re ready to sell your business, now is the time! The economy has improved over the past few years, and there are more buyers than ever before. In fact, according to the Small Business Administration, only about 50 percent of small businesses survive their first five years. If you’re ready to move on to a new chapter in your life or if you want to take advantage of a hot seller’s market, here’s what you need to know about selling your business for top dollar.