Eight Questions to Ask Yourself Before Selling Your Business
Before you can begin the process of selling your business, there are some important questions to ask yourself. Selling a business can be a very personal experience, and one you need to know if you’re ready for — both practically and emotionally.
1. Why Am I Selling?
It’s important to have a concrete answer for this question because it’s one you will definitely be asked by potential buyers. Is it the state of the economy that has you concerned? Or maybe your heart just isn’t in it anymore. Is there something else you’d rather be doing? Be ready to have a solid answer for this one. Your answer may play in part as you try to sell your business.
2. Can My Business Survive Without Me?
If a buyer senses your business’ dependence on you, they won’t make an offer. Take time to get your staff up to speed and confident in running the business in your absence. This will be important in the buyers’ eyes.
3. Is the Timing Right to Sell?
Not only should you be deciding if you should sell, but when you should sell. If your business is at all on the decline, that is the worst time to sell. Sales and profits are key. Give yourself some time to work straighten the business out before you think about selling.
4. How Are the Market Conditions?
Consider the market conditions in your industry. Is it on the downturn? If so, are there signs of improvement? Market conditions definitely tend to ebb and flow. It might be wise to ride out a downturn for more money in the long run.
5. Do You Understand the Sales Process?
There is a lot to learn about the sales process. Perhaps the most important part is to hire a broker (link to broker article) or an expert to help guide you along. Don’t try to do this on your own if you’re not
6. Would I Consider Something Other Than an Outright Sale?
There are other options, including structuring a deal to pass on the ownership to your employees through an Employee Stock Ownership Plan (ESOP)? Or many you would you consider selling a percentage of the company to a private equity fund. How about a leveraged recapitalization, a loan that puts a portion of the proceeds in your pocket? Keep your options open.
7. What Will Your Role Be After the Sale?
Are you willing to stay on if need be to help with the transition? Sometimes that helps seal the deal. Some buyers may even insist you stay on for some period of time for training. Regardless of your choice, when you know what your role will be, put it in writing to avoid any confusion.
8. How Long Will the Process Take?
Depending on the size and type of business you are selling, how long it takes to sell can vary. You may not want to hear this if you’re eager to sell, but if you can, give yourself 1-2 years preparation to ensure that your business is it tip-top shape and more appealing to potential buyers… which mean more money for you in the long run.