At one point, some business owners may realize that they no longer enjoy their businesses. Suddenly the desire to devote all free time to it wanes. Sometimes comes the realization that the financial return falls short of expectations. Or maybe, on the contrary, everything goes according to plan, and selling the business is a long thought-out decision. The reasons may be different, but they are not the point. The most important question is what you need to know before selling your business.
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So the Order of Business is…
The situation with selling a business is similar to reselling a car, which undergoes pre-sale preparation: washing, cleaning, painting, and minor repairs to attract the purchaser’s attention. In principle, no matter what it may be, even term papers for sale, the main thing is it should attract the purchaser. This simple and not particularly costly process can significantly increase the market value.
Selling a business has a precise analogy and includes three main stages:
- Selling, in fact
Preparation of the Business for Sale
Timely and quality preparation has a significant impact on the speed of the sale and the price of the business. First, it’s necessary to draw up professionally drafted documents. Then, if possible, get an audit report since the purchaser should know what exactly he receives and what essential costs are included in the initial phase of work.
To facilitate this task, an independent assessment of the licensed auditor and appraiser significantly speeds the decision to purchase a business. In addition, the adequately selected package of documents shortens the timing of the sale because any interested purchaser doesn’t have to conduct their independent verification and analysis.
How to Value a Business
There are several methods and approaches to business valuation. Of course, if you want to have a complete picture of it, you can always order a ready-made study at top essay writing services. However, the main factors determining the appraised value are as follows:
✔️ Demand for the particular business
✔️ Current and upcoming profits of the object of evaluation, the availability of opportunities to get a profit
✔️ The cost of creating the same business
✔️ The market value of the assets
✔️ The level of control of the business
The seller should calculate the cost of several approaches and be able to use these arguments in the negotiation process. Only the correct definition, a systematic search for a buyer, and infallible conduct of negotiations can help sell a business for the best value. Thus, even a fully comprehensive market value assessment doesn’t play a primary role in selling a business, being only an additional element in persuading the purchaser.
How to Choose the Right Purchaser?
That is the million-dollar question. Some buyers are very interested in precisely your kind of business and are ready to invest hundreds of thousands of dollars. For others, it may seem insignificant and unpromising. In general, it’s possible to write several Supreme Dissertations by types of purchasers. However, a business has value and significance only for someone who needs it.
The classical approaches used in marketing also apply to business because, although it remains a process, it acts as a commodity when sold. First, we need to identify buyers. Who are the intended ones? So you should define your target category of purchasers, model their behavior in negotiations, and determine the main selection criteria.
In general, be prepared to either become a specialist in the sale of the business or find an appropriate one. Of the many types of business purchasers, depending on the period of investment enterprise, some “awaken,” others, on the contrary, cease operations. Each class has specific drivers and notions of purchase rationality that are not limited to economic reasons.
After acquiring a business, the purchaser knows what steps to take and decides to buy based on his motives and needs. Thus, economic factors are necessary but not necessarily the primary role in purchasing. So when choosing a purchaser, you need to understand the motivations of each type of customer to make a reasonable offer based on this information.
Common Mistakes in Selling a Business
The market for the sale of existing businesses is a relatively new phenomenon. It doesn’t yet have sound principles and customs of business turnover. For the most part, the market is for purchasers, not sellers. Thus, any actions that can affect the loss of value, and disrupt the sale transaction, leading to additional time, effort, and other negative consequences, are mistakes. At the same time, only circumstances that are up to the seller are taken into account:
❌ Incomplete preparation before the sale
❌ Underestimating the importance of correctly identifying purchaser types with their motivations
❌ Wasting time for “false” buyers
❌ Failure to adequately justify and defend the price of the business
❌ Rushing the sale or being hasty
❌ Improper negotiating strategy
❌ Breach of confidentiality of the planned deal
This last mistake requires more detailed consideration. It may seem impossible to engage in searching for a purchaser while keeping this information secret. However, disclosed public information about the sale of the business can cause significant harm:
- Competitors know about your plans and use this information to poach your company’s existing customers. Many of them are unlikely to want to continue cooperation, and without customers, you can’t continue the company’s work in the case of a failed sale.
- Suppliers and banks may change the terms and conditions of cooperation. In this case, the company will need an additional flow of working capital. But, of course, it does not develop in the best way.
- The company’s employees are also part of the business value. Being aware of the impending sale, many of them may begin to look for new jobs. But without professional employees, the business isn’t in such demand.
To avoid potential trouble in disclosing the confidentiality, it’s necessary to secretly make preparations for the sale, conduct negotiations with potential purchasers, and make the deal as soon as possible.
A business is a commodity. But it is a commodity that inevitably affects the contract under which it’s sold. Unfortunately, life shows that most business owners who have decided to sell it are not ready to make this deal. However, if you choose to sell your business and use the recommendations from this article, you’ll surely succeed.