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Selling Your Business: What Should You Know

P/E Ratio

It is expected that 5 million baby boomers may exit the business market. The reasons for quitting may vary – entrepreneurship isn’t your thing, you don’t have time anymore to do your other stuffs, maybe the business is losing money, or maybe you simply want to cash out or for health or financial reasons.

Taking the decision to sell a business should be a premeditated one. It should be well thought of and given due consideration for sufficient time.

Adequate planning and adopting the right strategy while selling your business is required to avoid making expensive and painful mistakes.

Let’s face it. You have been through the toughest part already. Still, there are things you need to do till the business is sold. It is best to use professional help to give out the message that you are serious about it.

Questions such how do I sell my company; how to sell a business, might be topmost on your mind now.

Here are some things you want to know before you sell your business:

  1. Finance books must be in order: Buyers will evaluate your company. It is understood that buyers usually are interested in a company that is doing well, with an upside. The financial statements are the best indicator of the health of your company. Keep them accountant-reviewed and audited. At least three years’ worth of paperwork is necessary for evaluation.
  2. Evaluate the climate, both internal and external: Is the market on a downward trend? Is it recessive? Chances are there will be lesser potential buyers in a recessive market. In addition if your company is not in a healthy state, it may attract fewer buyers or its valuation will suffer.
  3. Get your business valued: There are multiples available to get your business valued. They are a summary version of observed trends in the selling price of businesses and are industry specific. In addition, it is better to get a comprehensive valuation done via the most up-to-date business valuation methods.
  4. Keeping in mind the intangibles: When getting a valuation of your business, it is important to factor in the intangibles – people, knowledge, market position, customer base and brand value. Bring in brokers, local accounting firms and investment bankers who have prior experience in handing business sales.
  5. Maximize the price of your business: What’s your core competency? A company with strong focus on its core competencies usually attracts good valuation. Buyers will review any customer concentration, industry competitiveness, and other factors that count.
  6. Get to know your buyer: The price to earnings ratio is used by financial buyers as they are looking to make a profit. They make up most of the market and there are the strategic buyers who can afford to pay a premium for the business.
  7. Prepare for management succession: Delegate responsibilities and prepare a successor in the event that you are the management head of your business and will not be available after the sell-off. Involve your senior management team in the process.

With the right steps such as those above taken, any one can experience the successful sale of their business and can look forward to the next chapter in their life.

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