Right now is an extremely uncertain time for many small business owners. The market is bear, the shelves in stores are bare, and you may have already been toying with the idea of selling your business before but the current situation surrounding the CoronaVirus has pushed you to take action.
Selling a business is no small feat, but it isn’t as difficult as you may think it is – especially if you enlist the help of a professional, experienced team to help you stay on track and find the right buyer.
After you sell, you can take your earnings and invest them in the market. If you weren’t already investing in the market, now is a fantastic time to buy. Let’s take a look at the steps to take to sell your business quickly and why now is the time to take that money and invest in the market.
How to Sell Your Business Quickly: A Step-by-Step Guide
1. Prepare a Business Summary
A business summary is an overview of your business that tells buyers important information about your business. After potential buyers sign a non-disclosure agreement (NDA) you can send this to them to look over so they can decide if they want to purchase your business as part of a sales strategy.
You should work with a professional to help you prepare your business summary. Professional firms and brokers know what buyers want to see in a business summary and can be objective when putting the summary together – something that can be difficult for owners to do.
1a. Review Accounting Records
Your accounting records show potential value to a buyer based on your firm’s success. To discover how to sell a business fast, create a set of accounting records that includes the following:
- Accurate, up-to-date records that comply with accounting standards
- Annual business planning, budgeting, and forecasting
- Cash flow forecasting and management
- Metrics and dashboards
- Industry benchmarks and analysis
1b. Overview of Business Operations
Potential buyers want to know how steadfast your daily operations are.
A buyer (and their consultant) can usually tell if a company has top-notch fulfillment, billing, sales processing procedures and more in place, but why do they care?
There are usually two reasons why it is suggested to include an overview of your business operations in your summary.
- Companies who have good operational procedures in place tend to remain competitive in their industry.
- Most buyers don’t want to take on the burden of overhauling and implementing processes. Think of it in real estate terms. Many people want a turn-key house that they can move right into instead of a fixer-upper.
Here are some key items that a buyer may want to review:
- Procedures manual
- Organization charts
- Current supplier and customer contracts, employment agreements
- Documents outlining automated processes
Preparing an effective and thorough business summary is going to give you the best chance of selling your business when reaching out to buyers. This first step is critical and is the foundation for the rest of the steps on our list.
2. Market Your Business to Sell
During summary preparation, you will need to figure out who your ideal buyer is and how you plan to reach them.
For example, many business owners want the buyer to have experience in their industry and advertise their business in publications such as business journals or magazines that industry investors read.
3 Ways to Find Buyers for Your Business
- Reach out to them directly through phone calls or email. If your business is valued at over $1 million, this might be the best approach to take. Employ a third party to contact the potential buyers, so you can remain anonymous during the correspondence. If you know someone personally who would be a good candidate to buy your business, you can reach out to them yourself but we highly recommend having a professional help you write up a phone script or email that includes important things you should say.
- Advertise throughout your industry. We briefly mentioned this approach above. It includes advertising in trade publications, magazines and other media such as industry blogs that targets your investors. This is typically best for small businesses priced less than $1 million. This is likely the best option for businesses in certain industries that require specific experience, such as medical services or oil and gas engineering. Again, use a third party to help you reach out to publications and sift through inquiries.
- Advertise your business sale outside of your industry. This type of advertising includes print, web media such as blogs, and more. There are 15-20 standard websites that brokers use to advertise and sell businesses. Advertising this way can be expensive if you choose to do it yourself and not use a broker. To sell your business as quickly as possible, you want to advertise on as many of these sites as possible, but you should consider the cost of doing so.
3. Screen Buyers and Respond via Email
Most sellers either don’t screen their buyers or do it incorrectly, which is something you absolutely want to avoid.
These days, you will receive most of your buyer inquiries via email. You will need to prepare an email template to use for those inquiries. Use this template to respond to every inquiry even if it is from someone you have met in the past. As we said earlier, we highly recommend you work with a professional broker to field these requests.
Serious buyers almost always ask additional questions and request more information. If this occurs, give them general information about your business and request that the interested party sign an NDA before you provide further information or your business summary.
This will immediately eliminate people who are not serious about buying a business. Buyers who aren’t motivated almost never sign NDAs. We aren’t exactly sure why unmotivated buyers reach out, but their intentions are likely not good.
Keep your NDA simple and limited to one document. At this point, the goal is to screen buyers to see if they have the motivation and money to buy.
This and the next step are extremely timely. If you take too long to respond, the interested party may not think you are serious about selling and not move forward with the deal.
4. Meet with Potential Buyers
Email your summary to buyers who sign the NDA and have the motivation and cash to buy your business. Put a number that you can be reached at in the email (your email signature doesn’t count) with a sentence saying that they can reach out to you anytime with questions.
This is a time to practice the “Don’t call us, we’ll call you” adage. Do not call the buyer or email them multiple times to follow up. If a buyer is serious about continuing to discuss buying your business, they will follow up with you.
If the buyer emails you a few questions, answer them. If there is a lengthy list of questions or you notice you have emailed back and forth multiple times, set up a meeting via video conference (in person is not ideal due to COVID-19).
If they persistently ask for more information and won’t meet with you, you may want to move on to your other prospects.
There are no real rules for screening and correspondence with a potential buyer. If you feel that something is off with a potential buyer, talk to your broker, consider their advice, but pay attention to what your guy is telling you.
You can meet with multiple buyers at this time but remember that buyers won’t want to wait around for you to make a decision so try to move quickly.
5. Negotiate and Agree on an Offer
If you didn’t have a professional firm on your side throughout the first four steps of the process, now is the time to reach out to someone. Negotiations can be tricky and something as simple as misspeaking can cost you.
This is when you ask the buyer to make an offer. If they do not make one, they might not be as serious about buying as you thought.
Focus on establishing an agreement between both parties, then you can have an offer drafted. You do not quite need an attorney, yet.
Before you start negotiating, have the buyer submit proof of funds along with the offer. If they are truly interested, they will oblige.
6. Due Diligence and Closing the Sale
In the financial world, proper due diligence requires an in-depth analysis of financial records before entering into a transaction with another party. Click here to view our Due Diligence Request Checklist.
Closing the sale is a routine process. The key to success, again, is preparation.
Prepare for the closing weeks in advance and maintain momentum with organized checklists and timelines.
See Successful Deals from DVS Group