Selling your small business isn’t likely to be the first thing on the mind of an entrepreneur when he/she decides to start a small business. After all, there are dreams of great success ahead. But sooner or later that likely will become a reality. According to smallbiztrends, 8,647 small businesses were sold in the U.S. in 2021, up from the 7,612 sold in 2020.
Why Do Small Business Owners Sell Their Businesses
There are many considerations that may lead to the possibility of selling your small business. Major financial pressures or bankruptcy can be significant factors. Others include a desire to seek more attractive opportunities, boredom or burnout, an inability to manage business growth, threatening changes in the competitive environment, untimely death or disability of an owner or a key business partner, serious disputes among financial stakeholders, a divorce, a decision to sell out at an economic peak, a personal/family relocation, favorable tax changes, or an attractive unsolicited offer.
9 Things to Know Before Selling Your Small Business
First, selling your small business will take time, so it is important to not neglect your business during the sale process. Work to boost your sales and focus on continuing good operating practices. Neglecting your business may result in reducing the sale price or even blocking the sales opportunity.
Second, monitor economic and industry trends to make sure that the timing will be right for selling the business at a good valuation.
Third, compile and organize your financial records and all business paperwork. Work with an expert CPA to make sure that everything is in order.
Fourth, be prepared to answer prospective buyers’ questions including why you want to sell, what is the history of the business, and how the business will run without you.
Fifth, get a reliable third-party valuation to provide a realistic estimate of what the business is worth. A valuation will include a thorough review of the company’s assets and liabilities, its revenue history and projections, its profit history and projections, and market trends and projections.
Sixth, get a good business broker that will locate buyers, list the business with appropriate marketplaces, and help you to negotiate the best price.
Seventh, pre-qualify your potential buyers. Make sure to spot serious real buyers versus suspicious buyers that are simply looking for information.
Eighth, get all sales documents in order including an asset purchase agreement and the legal contract for the sale of the business.
And ninth, be sure to get paid upfront.
Other Tips for Selling Your Small Business
Selling your small business is a significant decision. It will likely impact your time, priorities, and your personal and family life. So, before you make the final decision, be sure to clarify your reasons for the sale. That will help you to be more cool-headed about the decisions that you’ll need to make so you can negotiate better. It will help you to be better prepared so you can make intelligent and informed decisions. Plan for the sale far in advance by developing an exit strategy then carry that “eventuality” planning forward. Be honest in all sales aspects—that is the best policy. Be proactive with all actions involved in the sale.
Get Expert Accounting and Financial Assistance
Contact Doerhoff & Associates, CPA, based in Jefferson City, MO for professional accounting and financial assistance that you can count on. Doerhoff & Associates has one goal in mind, to provide comprehensive business accounting services designed specifically for your success.