At some point, as a budding entrepreneur, you are going to want to move on to the next thing. Whether that’s moving on to a new business idea or taking time out to enjoy the life you’ve worked hard to create for yourself. But that leaves you with the burning question of what to do with the business you’ve spent years and sweat blood over? Or do you just want to sell your business?
Just simply shutting it down might be something that’s not quite sitting right with you. Even as a freelancer, if you’ve built up a business and you have turnover and clients then just turning off the lights and walking away should really be your last option. If your business is viable or doing well and turning a regular profit, then chances are it’s worth something, both to you monetary wise and to someone who may want to buy it.
But, it’s not like selling your old junk on eBay. Selling your business is serious business and not something you should undertake lightly or without help. So, here are a few points to consider:
IS IT THE RIGHT CHOICE TO SELL YOUR BUSINESS?
You may think that selling up is the only option you have. But is it really? Are you ready to part ways with the little baby you effectively gave birth to, raised, nurtured, had sleepless nights over (remember when I said starting your business would be an emotional rollercoaster)? I mean sell your business, not your baby. This business may have been the pivotal point in changing your life. Are you ready to divorce your business? Are there other options you haven’t thought about? Like hiring someone to run it for you and just keeping an eye on things from a distance? Or asking your employees if they want to buy a share of the business to take over the running? Are you ready to hand over to a stranger and walk away? Or do you just want the cash a sale could raise because you have other plans now that you want to finance?
There’s a lot to think about before you put the for sale sign up.
GET HELP! USE AN AGENT
I know that nobody knows your business better than you and you may think you’re the best person to conduct the sale of your business. You’re not. Well unless you’re an agent or broker already. But I’m taking it that you aren’t. Selling a business is a legal process much the same as selling your house so leave it to the experts. My friends over at www.bcms.com are the experts at selling a business and can help you throughout the process. They also hold regular events if selling your business is something you are considering and want to find out more.
PUT A VALUATION ON YOUR BUSINESS
To sell your business it needs to have a value. This one is tricky and another reason for getting an expert involved. How do you put a price tag on your child? Ok, I know you aren’t literally selling your child, but your business may feel like one to you. How do you put a price to all the effort, blood, sweat, pain, sleepless nights, long days, even longer nights and learning everything from scratch for yourself? You can’t. And that is why you need help. But, a general rule of thumb is that your guide price should be linked to your turnover, plus assets minus liabilities. I did read somewhere that you would take the cashflow value and times it by 4 but then I read somewhere else that it can be anywhere between 2.5 to 6 times so again, it’s all subjective.
Is your business asset rich? Do you own property or a lot of vehicles or have a lot of stock in hand? You may have loans to buy assets so that all needs taking off the value.
Then there’s the none tangible assets. Things like goodwill are invaluable to any business. Perhaps your website has had a lot of investment and is ranking well in Google and your main lead generator. Your social media could also be an asset if it generates value for the business. These are all things that are very difficult to put a price tag on but invaluable to the running and future growth of your business.
Talk to an expert but also be happy with the valuation figure. Be happy that your hard work is going to pay off. If you feel that your business is undervalued then you are selling begrudgingly and you won’t be happy with the outcome.
CLEAN UP YOUR ADMIN
If you’re a creative then admin might not be your strong point. But things like your accounts and other business reporting are essentially what a buyer is going to learn the most from. That is what they will ask to see first. So make sure that your accounts are bang up to date and make sense. Don’t leave any black holes or missing receipts. Also, make sure that all your contracts and agreements are to hand. If essential items like these are ready for a buyer to view they may get impatient and look elsewhere. You may not be the only business for sale they are viewing. Much like when you sell your house. You tidy up and get everything in order because you know buyers are shopping around.
PRE-QUALIFY YOUR BUYER
If you are using an agent then they will probably do this for you but if you’ve had an independent approach come directly to you then you might want to check them out first. Who are they? What are they currently doing? Most importantly, have they got the funds to buy your business?
Think about this logically. How many times have you gone in a really expensive shop, tried on all the shoes you can’t afford, wasted half an hour of the sales persons time (when they probably work on commission) and you’ve known all along that you have a fiver in the bank and there is absolutely not a hope in hell that you can afford to buy those Louboutins? No matter how good their sales patter is. No matter how amazing those shoes look. They may feel like the most amazing pair of shoes that have ever graced your feet. It does not matter. You can not afford them. Even if you went on the beans on toast diet for 6 months you still couldn’t afford them.
Same goes for your buyer. Make sure they have the funds to buy first before they get to look at anything, accounts, contracts, client lists. Anything!
Your personal reputation could take a beating if you sell to the wrong person. Just look at the whole Phillip Green and BHS fiasco!
PREPARE YOUR EXIT STRATEGY
This may sound odd as we haven’t even sold your business yet but something a buyer will want to know is how you plan on leaving. Are you going to hand over the keys once the ink is dry on the contract and walk off into the sunset? Or will you stick around for a transition period and be on hand to answer the million and one questions they may have? Maybe you would consider staying on to manage the business for the buyer if they did not want to take the day to day control. All these things you need to be clear on how you stand from the start as they could also be part of your negotiating terms.
GET YOUR CONTRACTS WATERTIGHT
Again this is something an agent would take care of for you but if you are handling the sale yourself then this is the part where you would need to involve a solicitor. Is the sale a clean break from the business or could you be held liable for anything in the future? If there are any business debts have they been transferred to their new owner correctly? Make sure that all the legal stuff is in order so you don’t get any nasty surprises in a years time.
So that’s it. The deal is done. The cheque is in the bank. You’ve gone through how to work the alarm and told them where the hidden stash of biscuits are and now you’re waking up on day one of not owning that business anymore. Now what? Chances are you already knew what you were going to do when you first decided to sell up, so now’s the time to do exactly that. Whether it’s setting up a new business, spending your time fishing or going on a round the world cruise. Do it!
Don’t be checking up on your old business. No sneaky peaks at their Facebook page or quick calls to staff. It’s none of your business anymore. What the new owner does is entirely up to them. It may be painful if you see things going wrong or changes that impact staff. But that is the choice you made when you decided to sell up.
Now go and enjoy the spoils of your hard work.