Six Steps to Selling Your Business

Selling your business can bring financial rewards. But to get the best price, you need to minimize red flags to potential buyers and maximize the value of the business asset you have created. Before you sell, figure out how to best position yourself within the market and prove that your business is a good investment to prospective buyers. And be sure to keep in mind the six steps to selling your business: 

Your asking price should reflect your business’s actual—not just potential—value. Most buyers won’t take a risk on a potential value. They want to see proof of value, not possibilities. Proof of value comes from things like recurring revenue, a team that can lead itself, not depending on you, and a history of increasing profits and independence.

Potential buyers will be paying close attention to your business’s actual profits. Touting your revenue is informative, but it doesn’t provide the information an investor needs. Look at your profits, and see if there is anything you can do to boost them before you sell. If you’ve been managing profits from a tax perspective, and making them appear as small as possible, you may want to shift this for a few years pre-sale.

Potential buyers will want to see invoices and proof of deposits or account activity. Your tax returns aren’t enough. To do this, you’ll need to get your business’s finances in good shape before you sell, which means updated P&Ls with income and expenses broken down and categorized properly, plus future projections.

Your past financial performance may be relevant, but you can’t base your asking price on past profits. Buyers typically want to see how your business has performed in the last 12 months. Be prepared to provide ample proof of that.

Full disclosure when it comes to your business’s shortcomings is crucial to a good sale. In fact, this is one area that keeps many sellers from getting top offers. Buyers can quickly be turned off if they suspect you are less than forthright.