Questions to Ask When You’re Thinking About Selling Your Business
A large part of my job is to speak with and answer questions from people who are interested in selling or buying a business. More than half the time, I take calls from sellers who have no idea where to start, so they call, not looking for answers to questions but rather for questions that ought to be answered. The questions or answers that I offer come from the experience I have working at a business brokerage; and though at times it appears to be in favor of using a broker, it’s not always necessary or valuable to a seller to do so. The best thing for you to do, as a seller, is to become educated about the selling process, so that you can make the best decision for you.
Below are six questions that sellers ask or should ask themselves before they even begin the process of selling.
Is this a good time to sell? When is the best time to sell?
Depending on such factors as your goals and the financial condition of your business, there are buyers out there looking to buy a (good) business. Timing is also an issue, as you should look at the economic climate forecast for the next 12 months. How will your business stand up to the forecast? Generally, your company should be profitable and the economy strong. For more information, read “Is This a Good Time to Sell My Business,” written by Joe Mills of Entrust Associates. http://www.raleighbusinessbrokers.com/2010/10/28/is-this-a-good-time-to-sell-my-business/
Does my current lease have any effect on a potential sale?
If a lease is involved, you may have to think long term. For example, what are remaining terms of lease, e.g., if you are thinking of selling within next 3 years and your lease is coming up for renewal now, does that mean you will have to sign up for another period well beyond (say, 10 years) the length of time that you are planning to be with the business? Or do you have the option to relocate the business?
I don’t want my employees to know about the sale. How do I maintain confidentiality?
In most cases, sellers are correct in keeping the pending sale of their business in confidence from their employees. Knowledge that their place of employment is up for sale creates unnecessary anxiety for employees, leaving them with insecurity of their job stability, which could in turn lead them to search for other employment.
You can sell your business without your employees knowing about it. You can insist that potential buyers not approach the business or any of your employees for any reason but rather contact you directly or anyone representing you (your accountant, your business broker, etc.).
How do I find buyers? Where do I advertise?
There are a variety of ways to find buyers for your business and they vary depending on the level of confidentiality you require. You can try to sell to a client/customer, an employee, or a competitor. You can list the business on businesses for sale websites or take advertisements out in industry-related magazines. Business brokers have specific procedures and can do all the above without compromising confidentiality.
Do I have to offer owner financing?
While offering owner financing is not an absolute, it does bring in more inquiries to a business sale because it can give potential buyers the feeling that you, the seller, have confidence in the success of the business. The amount of financing you are willing to offer is also not an absolute. You can base your decision upon other terms of the sale, such as ultimate selling price, amount down, or length of time of repayment.
Should I try to sell it on my own or should I hire a business broker?
Depending on what factors are most important to you in the sale of your business would gear you toward selling on your own or hiring a business broker. If you do it on your own, you will need to allocate time away from your business to focusing on addressing buyers’ needs and questions relating to your business. This can often be overwhelming for sellers who operate their businesses.
These were just six of the many questions you should ask yourself before selling your business. I will continue to add to this list of questions and publish them in upcoming blogs as well. But, in closing here, the best thing to do when you’re thinking about buying or selling is to become as educated as possible about the process, especially if it’s your first time around.