How to Make Sure You Sell Your Business Before You Retire
It takes years of planning and preparation to sell even just a small business. If you’re worried about what will happen to your company after you retire, now is the time to start thinking about how to make sure it sells before you step down.
If you want to ensure that someone will snap up the business, you must strengthen the business’s operations and maybe even get help from a broker, an attorney, and an accountant. Here are some key steps you need to take to be able to sell your company:
Determine the value of your business
When you put your business up for sale, people will want to know about your sales, revenue, profit, growth, and systems. These are just some of the basics.
The value of your company will largely depend on its overall financial condition, location, market demand, the state of the industry, and the current economic climate, but potential buyers will also want to take a deeper look at your operations.
Be ready to answer any question. You may also want to hire a third-party valuation firm to give you a realistic estimate of what your business is worth.
Clean up your financial records
Anyone who is seriously considering buying your business will want to look at your financial records. You want to be as transparent as possible, so clean it up before you put your business up for sale and invite prospective buyers to examine it.
Make sure all your financial paperwork is organized. Work with an accountant to collect, standardize, and present your financial records, including business tax returns, credit history, and financial statements.
Is all income accounted for? Try to pay off all debt and loans. Make sure no major family expenses, like vehicles and real estate purchases, are on the business books.
This step could take years of work, but it’s vital that you do it. Well-organized financial records add value to your company.
Prepare for your exit
Always plan ahead. Even if you are many years away from retirement, you must think about what will happen when you step down. Often, some unexpected event, like pressure from a rival or nobody in the family wanting to take over the business, will force a business owner to sell low.
Don’t let this happen.
Are your children planning on succeeding you in the business? If yes, that’s great. If and when the opportunity arises, they can decide if they want to sell or not. If you don’t have anyone to pass the business on to, sell to a trusted employee.
Talk to a business broker
Handling the sale of a business yourself does help you save money, especially if you’re selling to a family member or a trusted current employee.
However, there are instances when paying a broker’s commission is worth it. A broker can do all the work needed to get the highest price for your business while you work on adding value to it and keeping it going. Brokers can tap into a massive network of prospective buyers and have the expertise required to negotiate the best price.
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