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How do I sell my business

Written by: Russell Bowyer

Article Overview: How do I sell my business is often asked by business owners and can be answered by using the following check-list: 1. Price it right - do NOT over value your business. This might be an obvious point to make and just like selling a house with business sales, if the price is set too high you will probably not even get any viewings and will certainly not sell. Valuing a business to sell is not as easy as valuing a house and the only true value is where you end up with a willing buyer and a willing seller. However, having said that you will need to have it valued and to do so you will probably use a business broker - which leads nicely onto my next advice.

How do I sell my business

How do I sell my business is often asked by business owners and can be answered by using the following check-list: 1. Price it right - do NOT over value your business.

This might be an obvious point to make and just like selling a house with business sales, if the price is set too high you will probably not even get any viewings and will certainly not sell.

Valuing a business to sell is not as easy as valuing a house and the only true value is where you end up with a willing buyer and a willing seller. However, having said that you will need to have it valued and to do so you will probably use a business broker - which leads nicely onto my next advice.

If your business has been on the market for more than three months and certainly for more than six months then I would suggest that it is over valued.

2. Use a broker to sell your business

Not all business brokers know their stuff, so I would recommend getting a valuation from at least two brokers or probably three. Be careful not to use the broker with the highest price, as this might not be the correct business valuation, it might be to entice you to use their services, as a high valuation will be music to your ears.

3. Be willing to accept ‘Vendor Finance'

I see too many business owners and for that matter too many business brokers not willing to accept vendor finance as part of the sale. For example, if your business is worth say £600,000, I would suggest accepting £200,000 as vendor finance, which will give the buyer a bit more room to manoeuvre with their own capital and bank finance. If they are using bank finance, then subject to the present economic situation, banks will lend upward of 60% of the purchase price. In this scenario 60% of £600,000 is £360,000, added to the vendor finance of £200,000 eaves the buyer to find £40,000, which opens the sale of your business to many more buyers. However, not all banks will see this quite in this way and may prefer the buyer to put up more than £40,000, but the idea is what I am trying to get across here.

4. Remember what you have had out of the business

When you are at the point of selling the business always remind yourself why you decided to sell it and reflect on what the business has provided you over the years, assuming you have had it for a while. Too many business owners forget that they have used the business to buy their home, to fund their life for X-years and so on; they then think it is so valuable and forget the reason they want to sell and end up with it on the market for months, if not years and then blame the agent. Blaming the agent might be valid if the valuation is wrong and where the business has been over-valued, but ultimately the final decisions rest with you.

5. Prepare your business for a sale.

Buyers of business are put off by sellers that how out of date information. Make sure you have up-to-date accounts and have your management accounts as up-to-date as possible and at your fingertips, this will serve to impress the buyer and give them confidence in the business.

6. Make yourself redundant

Leading up to the sale of your business you should look at making yourself redundant from the business. Delegate your work as much as possible so that the business will operate without you as much as possible. By doing this will open your business up to more potential buyers and in turn make it more desirable and more valuable. If necessary recruit someone to replace what you do in the business and spend time training them up before you put the business on the market.

You might be thinking that this will reduce the profits and thereby reduce the value of the business, but not necessarily. Let me explain by way of an example:

Option1. Business X is making profits of £120,000 per annum and the business is very dependent on the owner with him working 6 days a week from 8am to 7pm each day.

Option 2. Business X employs two people to replace himself at a total cost of £50,000 to the business thereby leaving a net profit of £80,000.

The value of the business using option 1 would be a multiple of between 1 and 2 so let us say 1.5 times profit, so a value of £180,000 - but this business will be difficult to sell, as the new owner will have to consider stepping into the shoes of an over-worked vendor.

The value of the business using option 2 would be a multiple of upwards of 3 and if it were a 3-times multiple this would be £240,000 and a more attractive option to buyers/investors. So even if the cost of replacing the employees cost up to £60,000 the business value would not be affected greatly, but you would have a much more attractive sales proposition to business buyers.

In option 2 the owner could spend a few months focusing on business plans and focus on improving the business in other ways, now that his time is not taken up running the business, which in turn would make it much more profitable and in turn more valuable for sale.

7. Employ a consultant

You could opt to employ a consultant to help you get your business into a saleable condition - email me for details - info@in-business.org.uk. A few thousand pounds spent sorting your business out before it is put on the market could earn your tens of thousands back in the asking price and a quick sale.

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Article Tags: business broker, business owners, business sales, Business sales, help me sell my business UK, How do I sell my business, how do I sell my business, sell a business, true value, willing buyer, willing seller



Related Forum Posts
Selling my business.... - I am looking to sell my business. It is a profitable business but I want to get out because I am burnt out after 7 years(since I was 17)......... I am almost ready to sell(making the proper preparations)..But I'm unsure about my lease with the landlord. He doesnt seem to want to resign.. I am worried about how marketable my business is with only 2.5 years on the lease... When I sell my business, does my landlord have to resign with whoever my buyer is? Thanks in advance... G.
Re: Domains - Hey David, Why do you want to sell your domains? You can give them on lease for a couple of years. The reason why I suggest you this is that the two sites you want to sell can do business for you. You are already into SEO and hence you can run a website. You may have personal reasons for selling them off, like you are too occupied with other work, but still, why to slay the goose that gives golden eggs? It just needs a few minutes of your precious time. However, if you have made up your mind, try to find out some organization into ipods and make a deal. Alternatively, use the site for Blogging (it looks like a blog at the first go), do some Adsense and earn revenue. Ups and downs are a part of business and you should not plan to sell off when things don't go your way. Be a fighter. Good Luck.
Insecure Leaders - I'll take a bet on some business leaders being insecure in their position and if they ask anyone else for help they might get shown up! Another reason might be to do with ego and as you say, it could be a sign of weakness. For the smart business leader it's a matter of finding the people who will actually benefit the business rather than a consultant just trying to sell themselves primarily for their own benefit. I find that most companies who try to sell me something "beneficial" are trying to benefit themselves first.
Re: private label rights - Don't think of PLR as just articles or written work. Also consider actual products. Example if you were to create or have someone create a "backlink creator", you can sell the PLR to that. In this case it can be easier to make more money and faster. Instead of you having to market and sell something for $20 sell the PLR to 100 people for $100 then they can sell for whatever they want. If you were to get 100 people to buy it at $20 that is $2000 for you. Now if you were to sell the PLR to your product to 100 people for $100, obviously that is better... So if PLR is done properly you can make a lot of money... I have some things I will be getting into in 2009 that relate to this subject, so I will share as I progress.
Make your strategy - First up, you need to identify where you want to go; 1. Who do you want to sell to? 2. How do you want to sell it to them? 3. What do you have to work with in the way of resources. 4. How much do you need to sell it. 5. What do you need to sell it. 6. What makes your product different to everyone else’s? I saw your design, you're a talented graphic artist, but immediately selling a design featuring only your logo without an existing market presence to back it may prove to be a mistake. Have you thought about offering a range of apparel, or even offering custom designs to people as an option?


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