Five Things to Keep in Mind When Selling Your Small Business

If you’re thinking about selling your small business, doing the following can help ensure a successful transaction:

• Assess and assign value. Arriving at a realistic valuation for your business can be tricky. Your figure should take into account inventory, receivables, equipment, property, market share and other business assets and should be based on historical and projected revenues. A professional valuation can make it easier to identify an appropriate market value.
• Clean house and crunch the numbers. Your office or plant and your books should be in tip-top shape. A serious buyer will ask for profit-and-loss statements, balance sheets and tax returns going back several years, as well as a list of inventory, equipment, furniture and whatever else will be included in the sale.
• Market your business. Create a brief document that describes the business opportunity and its income-generating potential. Run ads in trade publications or online communities to help spread the word that your business is for sale. To weed out serious buyers from those who are “just looking,” ask for their financials and other history before opening your books for review. To safeguard your proprietary information, ask interested parties to sign a confidentiality agreement before you reveal any details.
• Consult professionals. A number of professionals can help make the sale of your business easier and less risky. For example, your accountant can make sure your books are in order. A business broker or mergers and acquisitions professional can help you locate a buyer and negotiate the sale. A financial advisor can help you examine the financial impact of selling your business, both in terms of tax liability and income. And a lawyer can draw up your purchase agreement and escrow arrangement.
• Give it some time. Plan on spending six months to a year or more to prepare your business, locate a buyer and seal the deal.