There are many reasons that compel entrepreneurs to sell their business ventures. Perhaps, you’ve realized that there’s nothing left for you to contribute to your business and looking to embark on your next adventure.
Or maybe you’re facing struggles in your personal life and want to take some time off to focus on yourself. You could also have figured out it’s time for you to retire and relinquish control of your business to another spirited entrepreneur.
Selling a Small Business: The Challenges & Obstacles
Irrespective of your reasons for selling the business, you should know that it’s not going to be easy. If you’ve built a small business from scratch, you’ve likely invested your sweat and tears into it. It’s only natural that you’ve forged an emotional bond with your business over the years.
This could make parting ways exceptionally painstaking. But it shouldn’t stop you from launching new ventures or focusing on your personal life. You just have to know when and how to sell your business.
Needless to say, selling your business isn’t an overnight process. It isn’t as straightforward as finding a buyer and negotiating a good deal. Instead, it requires extensive deliberation, foresight, and quite a bit of professional help.
You need to evaluate whether your business has reached a stage where you can hand it over to a buyer. Also, you should assess the impact this is going to have on your employees, clients, and other stakeholders. You even have to identify potential buyers and select the right one.
But before you go around looking for buyers, you should first analyze whether you’re ready to let go of your business. In this blog, we’ve compiled a list of questions you should ask yourself before deciding to sell your small business. Let’s take a look.
1. Why Do I Want to Sell My Business?
Before you find out how to sell a small business, you should first understand your reasons considering this step. Have you lost your interest and passion for the business? Or are you looking to take a sabbatical to focus on your mental health? Or do you want to take some time off to diversify your skills and knowledge?
Your answers to these questions will determine whether you’re selling your business for the right reasons. Moreover, it’ll help you understand what you want to do after you’re done handing over ownership of the business. You can also determine whether you want to retain partial ownership or a stake in the company.
2. Is This The Right Time to Sell My Business?
The right time to sell your business depends on various factors. To begin with, you need to consider whether your company has reached a stage where someone would be interested in buying it. As a ground rule, you shouldn’t sell your business unless it boasts sound financial health.
Additionally, you should evaluate the state of your industry, stock market prices, and economy before you decide to sell your business. The optimal timing for a change of ownership will also depend on the type of products/services you’re offering.
3. Do I Need Professional Help?
Whether you’re selling a large corporation or a local business, it’s going to involve various complicated steps. From determining your company’s valuation to analyzing bids from potential buyers – doing everything on your own can be difficult and inefficient.
Also, you’ll have to prepare a ton of paperwork, including legal documents, tax summaries, sales reports, and other financial records. That’s why it is wiser to ditch the DIY route and enlist the help of an experienced business broker. You should also curate an army of legal and financial advisors who can assist you at every step.
4. Am I Emotionally Ready?
Negotiating a deal with a buyer is only the first step of selling your business. Depending on the type of deal you strike, you’ll likely have to spend months coordinating with the new management to complete the transition.
It could mean working alongside complete strangers who may not share your vision for the business. This, in turn, could be an emotionally exhausting experience. So, you must ensure that you have some extent of objectivity about your business before you consider selling it.
5. What Type of Transaction Do I Want?
Lastly, you should analyze whether you want to forego complete ownership or retain a small stake in the company. It’ll influence the type of deal you negotiate with the buyer. If you decide to have a stake, make sure you’re comfortable with the idea of collaborating with the new owner and their team.
What factors would you consider while selling your company? Share your suggestions in the comments section below.