Every business owner has to exit their business at some point – be it for personal or professional reasons. Though selling the business can be a challenge, attempting to sell it quickly poses a unique set of problems. The aim of this article is to educate small business owners on how to sell your business fast.
Though every sale transaction is unique, a well-run business generally takes around 90-180 days to be sold. Most business owners prefer a quick sale, but it makes the acquirers nervous as they like to have enough time to do their due diligence.
What state is your business in?
Before you start, you need to understand which state your company is in. We can classify businesses into 3 categories -
1. Booming business– Every month, your revenue is increasing and you have healthy margins. Loyal customers and a pumped-up team keep the energy levels high in your business.
2. Stable business – Revenue is constant and you have good margins that earn you a good profit. You’ve been in business for many years and have a track record of stability.
3. Failing business – You hardly have customers, and revenue is falling. You may not be breaking even on an operational level.
Obviously, it’s easier to sell the first 2 types of businesses compared to the third. There are buyers who are interested in buying a failing business but few. Your strategy for sale of the each of the categories would also vary, which has been discussed further in this article.
Selling a business quickly comes with its own set of challenges
Tips to make a quick sale
The following tips are time tested and proven to help business owners in selling their business fast
1. Get organized – Get rid of unprofitable customers – You might have signed an agreement with an early customer who’s always caused you trouble but you never let go of them. Your acquirer doesn’t need to see deals that will be a liability for them in the future. Get your team ready and tell them clearly what your intentions are with the company. During the months when you’re trying to sell, the team has to function efficiently and ensure the business is running well in your absence. Update your inventory numbers, clean up your deal with vendors and make basic fixes in your business (it could be fixing a leak in your roof or updating your taxes for the previous year).
When selling a business, it’s very important these hygiene factors are taken care off – else you’ll lose a lot of time when potential buyers do their due diligence and find problems in all these areas
2. Update your finances - Sit with your accountant and bring all your books up to date till the latest month. When quoting revenue and important metrics to potential buyers, you need to be equipped with the latest and truest numbers at all times, and lack of data is often seen as a sign of weakness by potential buyers.
Ensure all filings and submissions that need to be done with the Government are taken care of, and all registrations and permits are up to date.
3. Get a valuation report by an independent audit firm - Work with an independent auditor to get a valuation report for your business which can be the price you quote to your buyers. During early talks with potential acquires, quoting an exorbitant amount for your company may drive them out of the negotiation room and lead to delays in sale. It’s best that you have a valuation report that backs why you want the price you’re quoting.
4. Remove yourself from the operation aspect of your business - Of course you’ve always been the heart and soul of your business – Most of your customers have a direct relationship with you, and not with your company. You can make a sale better than your best salesman, and you care more about your customers than all your customer support executives combined! You’re the first one into the office and generally the last one out. It might seem impossible that the business can function without you.
That’s exactly what acquirers are scared off when they buy small businesses – that the strength of the business lies only in its owner. Prior to commencement of the sale proceedings, withdraw yourself from day-to-day activities and let your team take care of operations. Prove to potential buyers that your business can thrive, let alone survive, without your presence.
5. Talk to multiple parties till you close - A rookie mistake many business owners do during sale is work with potential buyers serially, than in parallel. When talks with one potential buyer start looking promising, most sellers stop looking for other buyers. In many cases, the deals fall off at the last stage after 2-3 months, and the seller is back to square 1 and goes through the process all over again. It sets you back in time, and delays the entire sale. The deal is never done till the contracts are signed and the money is received in your bank account – never stop looking for buyers till the deal is done.
How to find a buyer?
Once you’ve done all the ground work, it’s imperative to reach out to as many potential buyers as possible. Here’re a few ways to do this -
1. Business brokers - There’re many professional brokers for businesses who specialize in helping customers sell their business. It’s good to work with business brokers as they can help you find buyers as well as help you with the paperwork and structuring the sale
2. Sell your business online - Digital platforms like Rēfuêl.com help small business owners find buyers through their website
3. Employee sale - Management buyout or employee buyout is a great way for you to ensure your company continues whilst rewarding your employees with ownership of the company they’ve worked hard for. There’re many financing options facilitate management and employee buyouts.
4. Look within your network - An easy way to sell your business fast is by finding a trusted friend, acquaintance or relative purchase it from you. Given that they’ve seen you build the business for many years, it will expedite the process of sale and make it quick.