If you own a business, chances are that you know a thing or two about making deals and thinking a couple steps ahead of your competition. The ironic thing about business owners, however, is that they are so focused and rational about everything involving their company, except when it comes to selling the business they’ve built up. Unfortunately, no one owns a business forever, and even selling to family or business partners can be a bit tricky. Here are three easy questions to find out if that price is right and how to tell if you're ready to sell.
Do you know why you’re selling?
Some people get burnt out being an owner and finally want to try something else; this usually happens when exhaustion outweighs passion. Others want to capitalize on what they’ve built, collect their reward, and move on to the next challenge of their careers. Those looking to retire might want a “retirement package” of sorts and selling the business to the right owner will allow the business to continue. Asking yourself “Why do I want to sell?” will let you know if your incentives are financial, personal, or a mixture of the two. Purely financial reasons are easy; do you want to sell now or try and make more later on? Personal reasons to sell a business, like family, personal ambition, or fatigue, can get you out of a stressful and unhappy position. Making sure you’ve found the right buyer is important as well. By vetting the potential buyer and seeing that he doesn’t have a history of business problems means your business will stay productive and you’re going to get paid.
Are you prepared to sell?
Most financial advisors recommend at least 1 and a half to 2 years of preparation before selling a business. Detailed financial records, thorough business appraisals, and time to think through different offers and options can only happen when you’re not rushing into a sale by a certain date. Getting a team of professionals dedicated to buying and selling businesses will surround you with the information you need during the sale. Dedicating 18-24 months to making your business “sale-ready” can also be financially advantageous to you as well. People would rather top dollar a business that is steady or growing rather than one that is declining and looking like a fixer-upper. It might take a year to see what your business is really worth, and getting the right appraiser is a worthwhile investment. Personally, are you ready to see someone else be in charge of your company? Will your business be okay without you at the helm, or are you okay with seeing it succeed without you there? Will key employees stick around through the transition and what can you do to keep them if they have doubts? This should be a well thought out decision, and getting cold feet could mean you’re not ready to sell.
What are you going to do next?
The hardest question to answer is: What are you going to do that first day after you sell? Most people focus so hard on finding the right seller and getting the right price that they forget about what’s on the other side. Even with a big fancy check and 60 extra hours in the week to relax, it can take some time getting used to not being the boss. Some people take the money and invest it into a new business or venture. Planning your next step is important before you sell your business.
Selling your business can be a stressful endeavor if you’re not properly prepared. Some owners see a big number on a piece of paper, and forget about the other factors of a sale, while others think of it as a way to get out of a bad situation. These questions are important and in the end, it might be a business decision that makes sense when you look at the dollars and cents. However, owning a business is a point of pride for most people, and the question you have to ask yourself is, “Do I want to sell?”