Important Questions to Ask Yourself Before Selling Your Business

Selling your own business is as crucial a business decision as starting, operating, or expanding one. Aside from investing your resources, time, and effort into it, it has become a major area of your life and parting with it may have some surprising emotional repercussions if you do not carefully plan for such an eventuality.

On a happier note, if you do make a conscious effort to map out a desirable plan, you are sure to end up less stressed and happier to move forward as you go through the next phase of your life, be it retirement or an entirely new business venture.

The process of selling your own business can be tedious and complex. There are questions you should ask yourself for which you should find answers without delay. It is critical that at this point you give yourself sufficient time to ponder these questions if you are to achieve your desired outcome. Here are 7 questions to get you thinking:

Ask yourself…

1. Why am I selling my business?

The reasons for selling are varied – new business undertaking, change of career, emigration, retirement, health concerns, family issues, business failure, economic down trend, and a lot more. It is essential that you examine the real reasons why you are putting your business on the market because this will become part of the basis for the factoring other processes necessary for the sale. For instance, if your reason for selling your business is business failure or a bad economy, you may not be able to command a good price and it would be best to consider postponing the sale.

2. How prepared am I?

The preparation phase entails various processes. After making a final decision to sell, your key management and the general work force should be informed in a discreet and professional manner to avoid speculation and panic amongst the ranks.

Accurate and updated financial records of the business should thereafter be made ready. A complete inventory of all the business’ assets, especially the tangible ones, should be undertaken and a thorough review of existing systems and procedures completed thoroughly.

Other documents that can be prepared at a later time are the:

* Information Memorandum – containing complete information on your business
* Confidentiality Agreement – to prevent information leakage, and
* Letter of Intent – embodying the buyer’s willingness to buy after agreeing with the terms of the sale

3. How much is my business worth?

While a business can be valued in different ways, you, as the owner of the business, are in the best position to give an honest and true valuation of your business. Be wary of ‘rule of thumb’ valuation method as there are many other factors to take into account. Sit down with your Business Accountant to ensure you have the necessary facts and figures so your calculations are accurate. These days there is no need to engage traditional business valuation sources. Let’s face it, 90% of the work is done by you anyway, so why pay for expensive commissions when you don’t have to.

4. When is the right time to sell my business?

Proper timing is an important consideration when selling your business, but there is no hard-and-fast rule on when timing is right. Depending on your motives for selling your business, any time may be the right time. For instance, if maximization of price is your aim, a period of economic recession or depression is definitely not the right time. On the other hand if you are seriously thinking of retirement due to age or health, now is probably the right time, and so on.

5. Who can I sell to?

Though not as widespread as the market for hamburgers and hot cakes, the market for small businesses is just sitting around the corner waiting to be tapped. Your own family members, friends, customers, suppliers, and employees can be your first prospective buyers. Even your colleagues and competitors in the industry may be interested given the right perspective. The public at large is of course your biggest market, but you will need extra efforts and time to reach to them.

6. How do I sell my business?

The process of selling has greatly evolved with the advent of the computer. Reaching out to people far and wide has been made easy with the click of a button or a mouse. Selling your business through the web is the first option. It allows you to be seen by millions of readers plus do some handy research and it can make the process fun and exciting. Traditional methods such as print advertising in newspapers, magazines, bill boards, or posters are good sources, used in conjunction with the internet.