How To Sell Your Business In 2022
How to Sell Your Business
Some people choose to sell their business themselves. They don’t mind handling the hassle and delicate details of the transactions.
However, for you, it may be better to pass through an experienced M&A firm to land reputable buyers at great prices. But you’ll have to make your business attractive to such buyers.
Let’s show you how before we dive into the actual steps to sell your business.
How to make your business more attractive to buyers:
- Grow the profits of your business
- Keep your revenue consistent and increasing, and
- Build a strong base of recurring business/regular customers
1. Value your business
Most people calculate the value of a business as multiples of its yearly profit (EBITDA Multiple). It is a popular valuation model on Main Street.
So essentially, the larger your net income, the more valuable your business is to buyers.
IAG provides valuations as a part of our go to market process and strategy – you will learn what your business is worth in a much more professional and accurate manner.
Trying to do it yourself might yield inaccurate numbers that lead to disappointments. Also, our appraiser’s valuation can add authenticity to the price you offer buyers.
If you want to see a rough estimate of what your business could be worth – use our valuator report here.
While this in no way substitutes an actual business valuation, it can provide you with a ballpark of what your business could be worth as we start a brand new year and provide solid talking points for when you speak with our analysts.
2. Complete your financial audits
Since buyers are more attracted to businesses with a stable profit and long-term profitability potential, it’s best to put your finances in order.
Work with your accountant to prepare accurate financial documents for the past 3 to 5 years. Accurate copies of these documents (balance sheet, cash flow statement, etc.), along with complete tax returns, settle your buyer’s minds.
When you are prepared in this area, it can make the selling process significantly more smooth.
3. Sign up with IAG
If you think you can sell your business yourself, keep in mind that the vast majority of businesses never sell when prepared poorly. Think of it like real estate – how much faster do you sell a home when it is listed through an agent, versus “for sale by owner?” Plus, advertising your business for sale can have very negative consequences such as loss of customer trust, employee confidence and more. In most cases, a highly experienced M&A Advisor is indispensable.
With an M&A Agent, you can
- Get a higher valuation because of their experience and insights
- Land a better offer through expert negotiation
- Get faster and error-free sell-side due diligence
- Reach more buyers quickly by tapping into the agency’s network
- Keep the deal confidential, and
- Vet buyers more systematically
4. Prepare your business’s executive summary
Our qualified valuators and advisors will prepare a concise executive summary of your business. This will include major points that give a clear picture of your business to prospective buyers.
Points such as
- Business operations
- Objectives or mission
- Products and services
- Current financial standing and history
- Marketing and sales strategies
- Competitive analysis
5. Put your business on the market
When everything from 1 to 4 is set and ready, it’s time to get your business on the market. Our advisors can help you locate the ideal buyers for your type of business.
We confidentially advertise your business to our network of qualified buyers, many times this is enough to get quite a few buyers “on the hook,” and very interested in learning more about your business.
6. Choose your buyer
Pre-qualify your buyers before entering into an agreement. Ask important questions to assess a potential buyer:
- Find out if they have secured funding for this transaction. Also, ask for proof that they have the capital to make the down payments and finance business operations for the first 6 months.
- Are they ready to make a purchase immediately? Some buyers may not fit into your timeframe and that’s fine. Just ensure you get someone who’s ready to buy when you’re ready to sell.
- Ask if they have the experience and ability to run a business. Even without experience, see if they have enough knowledge about the field to handle business operations.
Use this to create a shortlist of qualified buyers so you don’t waste your time with the wrong ones and risk exposing your intent to sell.
Or, let our experienced transaction team do all of this for you. – More info.
7. Allow due diligence to occur
This stage can take a significant amount of time if your documents are not prepared professionally. Lots of delicate legal documents (purchase agreement, asset listings, bill of sale, non-compete agreements, etc.) are required. Some are up to 50 pages long.
But with our transaction advisors, you will get a thorough process that protects you and your interests.
50% of business sales fail during due diligence. Follow the proper processes with the right lawyers to prevent your transaction from becoming part of that distressing statistic.
Allow 60-120 days for your buyer to go through their side of the due diligence process.
8. Close the deal
When all is said and done correctly from step 1 to 7, you can close the transaction, open a bottle of champagne, and celebrate a successful business sale. The next step is to plan a smooth transition process.
Our experienced M&A Team of pros can help you with all of this and more!
IAG M&A Advisors is a business intermediary consulting firm, facilitating the buying & selling of businesses. With over 100 years of combined experience, the IAG team has been a leader in the industry by helping the owners of privately held companies “cash in” on all their hard work and get the best payoff possible.
We are here for you if you have questions about selling, and ready to help you get started when you are ready.
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There are many aspects to consider when selling your business, make sure you have every part covered by signing up with IAG today!