How Do You Sell a Business? (I’m Telling You Everything You Need to Know!)
Have you ever wondered about how to sell a business? If you're anything like me, then your mind is always spinning with new and exciting business ideas.
I just love entrepreneurship because it allows me to exercise my creativity while also providing for my family. It's a blessing I couldn't be more grateful for.
But, because I'm just one human, I've learned along the way that to move onto the next exciting project, sometimes I have to let go.
Yep, even the businesses I've poured so much love and energy into, I've gone ahead and sold. And let me tell you, the feeling of that money clearing and hitting your bank account is pretty amazing!
This week, I'm diving into all of the nitty-gritty pieces of selling a business.
We're covering how to prep, how to price your business, and how you can get over the fear of being a one-hit-wonder and successfully transition into a new business venture.
If you've ever thought about selling your business, then this episode is for you!
How to Prepare A Business For Sale
As you build your business (or even think about starting), there are some essential measures you'll want to take to make the sales process go as smoothly as possible. Go ahead and grab a pen and paper because you will want to jot down these tips for future reference.
My first piece of advice is that you should be building your business like a package. Think of it like this, if you are wrapping a gift for a friend and are including several packages within that one gift, it's going to be pretty difficult to separate a few of those gifts from the whole present.
It's the same for your business. Typically, when people start, they don't consider the future possibility of selling their business, so they go ahead and merge all of their personal details into the mix.
Don't do that! You want everything to have its own little space and place. So here are eight things to be on the lookout for!
Eight Tips You Need to Know About Selling A Business
- Financials. Keep separate bank accounts! This one is significant because it can be challenging to separate all of those financial details down the road. If you don't have your businesses separated by bank accounts right now, then I want you to take this holiday season and do that. This is your challenge right now to separate things out and get your business its own credit card. Keep your personal credit cards away from your business credit cards. You will thank me later!
- Email. Don't use your personal email. Create a separate account where all business correspondence is sent from and to.
- Instagram. You don't want to run several businesses from one IG account. Make sure it has its own branding, logo, etc.
- Facebook. Same as with Instagram. You want a streamlined and individual account across all social media platforms.
- Domain. When you buy your domain, just keep it pure and don't attach other things with it. This helps the new buyer have an easier time with the transfer process.
- Tell customer stories. If you're thinking about selling, then you want to get your face out from center stage and start telling more of your customer's stories. That way, you don't have to be the face of your brand.
- LLC. You want your business to have its own LLC. Keep it simple.
- Track your sales. That helps the buyer see the potential growth of your business.
Where to Sell A Business
One of the first things I recommend is going through a sales broker. Yup, just like a realtor who sells your house, there are brokers out there that will sell your business. The average commission we see is around 10%, but that can vary depending on who you go through.
Another option here is to sell the business yourself. We've seen people sell their businesses through Craigslist (seriously!), in Utah, there is a site called KSL classified, and Biz, Buy, Sell.
Shopify Marketplace is another option and a site called Empire Flippers.
And something that a lot of people don't even consider is calling up their competitors. It sounds strange, but it actually works really well, especially if you have something that they can't get their hands on.
For instance, with COVID, there are a lot of machines and equipment that have been hard to find. Your business might be able to offer a competitor just the thing they've been looking for. It could lead to the opportunity to sell your business for a little bit more because you're such a valuable asset. So competition might just be your greatest chance of selling a business.
How to Price Your Business
How do you even evaluate what a business would sell for?
The truth is, it's valued at what someone is willing to pay for it. Bottom line! Think of it like selling a house. If you have a house worth two million dollars, but the rest of the neighborhood houses are only valued at one hundred and fifty thousand, you probably aren't going to get two million from that sale.
A good estimate just to get a ballpark figure is to look at 2-3x what your business makes in a year. This number might fluctuate a bit depending on if you have inventory and equipment and on what the market is demanding at that point in time.
Three Things You NEED With Every Business Sale
There is a lot that goes into selling a business that it would be impossible to cover it all in a single blog post or podcast episode. That being said, go ahead and tune into this week's episode for some extra tips and tricks and be sure to reach out and ask me any questions you may have about the process.
I wanted to leave you with the three things I think are most important with every business sale. Grab your highlighter because these are the top points you won't want to miss!
- Get a lawyer! They will help with the confusing wording and just generally uncomplicate things!
- Get an appraiser. They can help both you and the buyer to be 1,000% confident in that purchase price.
- Add in training hours. Instead of just handing over the keys to the business, go the extra mile and help the new owner get things going as smoothly as possible. Donating X amount of hours at the forefront and putting that in the contract will help you both out in the long run, so they aren't calling you in five years with a list of questions!
I certainly hope this was helpful to you all out there and gave you the confidence that you CAN sell a business!