The Basics You Need to Sell Your Business

Selling your business is no small undertaking. It can require years of preparation, on top of the years of hard work you’ve already put into your business. As we enter 2021, you may be asking whether this is the time to put your business on the market. Thanks to the pandemic and a looming recession, many businesses may not make it through the next year. Valuations are down, and the M&A market has slowed somewhat. That doesn’t mean you can’t sell your company. Thriving businesses are attracting eager buyers. Indeed, if your business has thrived during the pandemic, that shows buyers your company is an exceptional investment, and may help drive value higher than it would have been even a year or two ago. 

Buyers share one thing in common: they are risk-averse. This means they are most interested in thriving, profitable companies with proven value and resilience. When we look at the most profitable businesses of the year, we see how the pandemic has helped healthcare, manufacturing, certain service industries, construction, and distribution. These companies will likely continue to be in demand in the coming year. If you own such a business and want to sell it this year, you need to start now. For most businesses, it takes 6 to 10 months to complete the sale process. In some cases, the process may be even longer, especially if you have paperwork you need to clean up or steps you need to take to generate additional value. 

As you move through the process, here are the things you need to focus on preparing: 

  • Financials. Buyers do not want to invest in a mess. They need to see financial documents supporting whatever claims you make about your company. Make sure your paperwork is clean and accessible. Buyers will want to see balance sheets and tax returns, income statements, and any other documents evidencing your profitability. 
  • Develop an exit strategy. What are you going to do after your company sells? Do you intend to remain on for the transition, or leave as quickly as possible. What you intend to do after the sale can affect both your motivation to sell the company and the sale itself, since some buyers will want you to remain available for consulting. 
  • Determine how much your company is worth. Many sellers have unreasonable expectations about sale value, or go into the process blind to how it works. You need to work with an accredited valuation specialist who can use a proven methodology to value your business. This lends credibility to the process. It can also help you identify areas where you may be able to generate additional value in advance of the sale.