Considering the sale of your business leads to a multitude of questions. How do I find a buyer? How do I value my business? Is now the best time to sell? These are great questions and require careful consideration before making any decisions. This article will explore the various steps involved in preparing to sell your business.

Step 1: Evaluate Your Business and Yourself

Before even considering putting your business on the market, it is essential to evaluate its current state. This includes analyzing financial records, operational processes, and customer satisfaction. Take a critical look at your business and identify any areas that may need improvement. This will not only make your business more attractive to potential buyers but also ensure you get the best possible price for it.

Key Piece of Advice: Evaluate your business and your future goals to make an educated decision if selling is right for you. 

Step 2: Determine Your Timeline

Selling a business is not a quick process, and it's important to have a realistic timeline in mind. Rushing the sale could result in a lower price while dragging it out for too long can lead to a loss of interest from potential buyers. Consider the current market trends and personal circumstances when setting your timeline. The lending process can often take 90 or more days to complete. The biggest factors we see that affect the timeline are real estate appraisals, attorneys who are backlogged, and failure to secure all necessary documents for the lenders.

Key Piece of Advice: Start preparing your business for a sale one to three years before you plan on going to market.

Step 3: Determine the Value of Your Business

One of the biggest challenges in selling a business is determining its value. It's vital to have a realistic understanding of what your business is worth based on its assets, profits, and potential for growth. One of the most common methods used in business valuation is called the Market Method. This method can be compared to how your house is valued. With the Market Method for business valuations, we use advanced technology to review the transactional history of similar businesses either in your local market or on a larger scale. 

Key Piece of Advice: Be realistic about what your business is worth and understand the factors of value and sellability.

Step 4: Get Your Documents in Order

Having all the necessary documentation ready is crucial in the selling process. This includes financial records, tax returns, legal contracts, and any other relevant paperwork. Having these documents organized and readily available will not only make the process smoother but also increase the credibility of your business. 

Key Piece of Advice: We often come across businesses with poor financial records, so if you are considering a sale in the near future, we highly recommend seeking professional accounting help.

Step 5: Find the Right Buyer

Finding the right buyer is crucial in ensuring a successful sale. You want someone who not only has the financial means to purchase your business but also shares your values and vision for its future.  It's so important for a business broker to understand the owner's values and goals so we can determine if the potential buyer is the "right buyer" for you and your business.

Key Piece of Advice: Just because they are a "Buyer" does not mean they are the "Right Buyer."

Step 6: Prepare for Due Diligence

Once a potential buyer is interested, they will put together and sign a Letter of Intent and conduct due diligence to thoroughly examine your business. This includes digging into financial records, processes, contracts, and any other relevant information. Be prepared to answer questions and provide documentation during this stage. 

Key Piece of Advice: Identify and answer the most common and expected questions before the due diligence period even starts.  Also, make sure you can easily explain and prove all items on your P&L/Balance Sheets, including any adjustments done for the valuation.

Key Piece of Advice: Make sure the LOI is non-binding and allows you to continue marketing the business for sale. This way, you are not stuck to one potential buyer.

Step 7: Negotiate the Sale

Negotiation is a crucial step in the selling process, and it's important to have a clear understanding of your bottom line. Be open to compromise but also stand firm on what you believe your business is worth. Business brokers should build a "term sheet," which, exactly as it sounds, lays out all the terms of the sale. The term sheet will be sent to both party's attorneys to not only save time (and money) but ensure accuracy.

Key Piece of Advice: Create a detailed term sheet that both buyer and seller sign. This will be key to making sure both attorneys understand the deal.

Step 8: The Transition & Post Sale

For some reason, everyone seems to forget to prepare for this step. It's essential to plan for life after selling your business. Consider your personal goals and future plans, and have a strategy in place for how to manage the proceeds from the sale.

Key Piece of Advice: Professionals are at your disposal, whether it be for tax advice, financial planning, or guidance on handling the transition from one owner to the next. 

Selling a business can be a complex and emotional process, but by following these steps and seeking professional guidance, you can ensure a successful sale. Remember to take your time, evaluate all options, and be open to compromise. With proper preparation and careful consideration, you can achieve a profitable and satisfying outcome for both you and the future owner of your business.

Kégan English is president of Atlantic Coast Business Advisors, working with clients across WNC to facilitate the sale of their business and assist investors in acquiring their next venture. Learn more at AtlanticCoastBusinessBrokers.com.