Raising the Odds of Selling your Business
The business of selling a business is not exactly a new trend. The number of businesses listed for sale in many different forms of media is proof that this course of action taken by entrepreneurs is backed by the right reasons.
For several reasons, business owners decide to sell their company. Many do so due to personal reasons such as exhaustion. When the operations of a business is too much to handle for the owner, and starts to take a toll on his or her health, he or she starts to entertain thoughts on selling the business. A small or medium-scale business owner may also think it is most sensible to sell the enterprise especially if it is doing really well.
When the owner has had most of his or her life centered on the business, the times may call for a retirement, which is one of the most common reasons for a business for sale. It is not unusual either for business owners to think about putting the business up for sale when they need the cash.
When business owners think they are unable to steer the company toward its maximum potential because of the changing times, they may also think it ideal to sell – rather than insist on trying and risking its downfall. A struggling business for one owner may be a gold mine of opportunities for another, making a business sale a highly viable option.
There are also business owners who think it is the perfect time to change to a new industry or test the waters of an entirely different venture – and it makes sense to sell their existing one. A new interest may be the reason, for which a business owner thinks letting go of his or her current business is worthwhile.
Despite these strong reasons for selling a business, statistics show that only up to 5% of businesses for sale end up closing transactions in each quarter. In a recent article, The New York Times shares tips on how to increase the change of a successful business sale by answering important questions:
A lot of business owners are struggling to find a buyer who’s willing to pay anything close to asking price. If you are one of these struggling owners, you might want to consider the following questions:
What’s your revenue model?
Brokers tell me that businesses that don’t have a model that produces recurring revenue are much more difficult to sell than those that do. The best models are those with contracts in force. The second best are those that have systems in place to create recurring revenue.
Are you a passive owner?
The second reason many small businesses are never sold is that the owner continues to be the sole reason the business exists. If the owner leaves, there will be no business.
The goal is to be a passive owner, one who is not essential to the day-to-day operation of the business. Not only do passive owners have a better chance of selling their businesses when they want to, they also have more options of how to run the business while they still own it.
Who is the right buyer for your business?
If you want to sell a business, you need to think about who exactly is going to buy it. In many cases, the most likely buyer may be a competitor. You and your advisers need to figure out which information is sensitive and find a way to protect it, while also providing all of the information needed by potential buyers, competitors or not.
What do you do if you really can’t sell your business?
If you’ve listed your business, and no one wants to buy it, you have only a few choices. You can address the issues that caused potential buyers to walk away. You can keep running the business yourself. Or you can close the business.
Photo by Caroline