Those who read ActionCOACH eBooks or blog posts regularly will know how critical it is to spend more and more time away from your business, so that the money you make is not merely a reflection of how many hours you’ve put in. That’s the power of passive income.
One great step to becoming a financially-free entrepreneur is selling the business. You may have googled ‘how to sell my business’ and found tips from all kinds of sources, credible or not! That’s why ActionCOACH, the World’s Number 1 Business Coaching Firm, has developed the following 5 steps to help you sell your business for the best possible figure.
The prospect of selling a business is exciting, because it means the possibility of you taking a break, retiring early, or starting a new venture all together. But there’s quite a bit of work involved if you want to sell your business to the right investor at the right price. For example, be aware that to get the best sale value, it takes a good year of preparation before you even put your company on the market.
Here are 5 tips that really work when selling a business:
1. Sell your business the way you’d sell a house.
Selling a business and selling a house are similar in a lot of ways; most people wouldn’t let people tour their home without making some cosmetic changes and cleaning up before offering it for sale. The same is true for your business.
So, run the next year with good financials, keep your paperwork up-to-date and document everything. Outline each and every responsibility of each job and include key performance indicators that clearly establish what is expected of each player and group. Next, get your “house” in order. Over the next 12 months, give your business a fresh coat of paint and get it tidy.
2. Decide on your game plan.
Speak with professional advisors to seek guidance on the best plan for selling your business. Those might be Coaches, Accountants or the like; they can add immeasurably to your chance of successfully selling your business.
In your initial discussion, you’ll get a better idea of who your potential buyer could be, and how to best position your company to get the most value in the marketplace.
3. Learn valuations for your industry or category
During these discussions, you should get some solid information about the valuation models buyers will use for your company in your particular industry or category.
Different industries and different businesses use different multiples. Some use multiples of profit, some revenues, and others cash flow. You’ll also learn where the goodwill value in your business is going to come from.
You may be in a business where stock and inventory levels will figure into the equation, or one where your database is your most valuable asset. Perhaps you own some particularly valuable intellectual property. Or is it simply the earning power of the business that you’ll sell? Knowing what you have to work with, or need to focus on, will give you confidence in putting together a solid informational and sales package for prospective buyers.
4. Plan your information and sales kits
During the process, you will be putting together all of your materials in an overall information and sales package. Buyers will want to access information as part of their own due diligence, and the more information you can provide in a ‘kit’ the better and easier the sales process will be. Include these items:
● Samples of all of your marketing materials
● An overview of your financials
● Contracts for your team
● Inventory of your assets
5. Prep your team
Create and then implement a good communications plan with your team and management about your goals and objectives, your desired outcome and your reasons for the sale.
You may also want to seek outside guidance on this process as well, as communicating a sale can be tricky. The last thing you want is panic in your organisation before you’ve even got the sale. For help with this part of the process call ActionCOACH on <PHONE>.
Meet with your accountant or lawyer to make sure what kind of sale is right for you so you don’t pay more taxes than you need to as a result of the sale.
Finally, try to be patient. Around 30% of deals fall through in the due-diligence phase of the process. While all of the prep work can be exhausting, the more work you can put into positioning and ‘packaging’ your business, the quicker and easier the sales process will be, and the more value you’ll get in return. For more information on any of the details in this article, read our eBook Selling your Business here.
ActionCOACH can get you on track to sell your business for the best possible value. Contact us 02 9146 4439.