How To Sell Your Small Business As An Exit Strategy

Entrepreneurs who have spent any amount of time building a company will likely have mixed emotions about selling it, even to a trusted employee. If you add to that the many aspects of how to sell your small business, the mere thought can be completely overwhelming. However, how to sell your business can be a manageable task for entrepreneurs. There is a detailed process in place for entrepreneurs looking to sell their small businesses. With some education and planning, how to sell your small business can be a relatively simple series of events. In this post, entrepreneurs will learn what steps to take in advance to be well-prepared for the sale.

Have An Exit Strategy

It appears counter-intuitive to develop an exit or succession plan when you write your initial business plan. But it is a recommended step for how to sell your small business. For instance, if you decide to raise money, investors will most certainly ask you about the long-term plans for your business. Entrepreneurs with a strategy in place will be more successful at securing funds than those with a blank sheet of paper. Even if you do not plan to seek funding, it is best to start thinking about your exit strategy months or years in advance of the sale. The reality is that a defined exit strategy is essential for how to sell your small business.

Understand The Valuation

Many entrepreneurs do not have a handle on what their company is worth. Many factors affect company valuation, which is why it can cause confusion. A valuation is extremely important because it is the foundation for the small business’s selling price. Cash flow, revenue, and industry projections are just a few of the criteria that impact the valuation. Entrepreneurs can use online tools or hire an expert who can provide an independent valuation. You should keep in mind that the third-party analysis tends to hold up better during the negotiation process. Entrepreneurs understanding their company’s value are ahead of the curve when considering how to sell your small business.

Prepare Your Sales Memorandum

If you decide to hire a broker to help sell your small business, s/he will prepare the sales memorandum for you. However, the broker will rely on entrepreneurs for this information and with good reason. You are an expert on your small business and the best person to “sell” it. Generally, a sales memorandum includes details about your company’s finances, marketing initiatives, projected growth, competition, and the sales price. Entrepreneurs should only distribute this document to prospective buyers who have signed a non-disclosure agreement. This is an important step in how to sell your small business.

Consider Your Curb Appeal

Whether you are a small business owner with a brick and mortar store or an eCommerce store, your company has a presence. How this looks to potential buyers is something only you can control. It is a difficult balance of functionality and aesthetics but has to be addressed prior to listing your small business for sale. You can sell your business “as is” or make improvements to increase the valuation. Perhaps your physical location needs some paint or equipment upgrades. Or maybe your online store needs a website refresh. Regardless, entrepreneurs need to make enhancements before thinking about how to sell your small business to get the top dollar from potential buyers.

Find The Right Buyer

How to sell your small business requires finding the right buyer. If you are an entrepreneur who has worked tirelessly to build the business, you are probably looking for someone who can carry the torch. This means that the first offer or highest bidder may not be a good choice. Establish criteria for your prospective buyers and evaluate each one accordingly. Choose the new owner carefully, particularly if you have employees and long-term customers. Your reputation is still on the line even after you complete the paperwork.

Entrepreneurs need to start thinking about an exit strategy well before the actual sale. The steps for how to sell your small business are well-defined and straightforward. Part of the process includes preparing a valuation, making improvements and finding the right buyer. Education and planning are crucial so that entrepreneurs can continue to conduct business during this time. Entrepreneurs following these steps for how to sell your small business are ahead of the curve and on their way to a successful sale.