An important part of solid business planning is to consider your exit or succession strategy early-on. Your business is an asset after all, and like any other asset, you should know what to look for in the marketplace that indicates whether it’s the most opportune time to sell.
It’s easy to put off selling your business. Many entrepreneurs end up holding on to their “babies” until they reach retirement age. Unfortunately, you may not be able to get the best price for your business at that time. Instead, it’s a good idea to start thinking about selling at a time when you’re likely to get a good deal. And in order to do this, you have to keep in touch with what’s going on in the market. Are other businesses such as yours going for a good price? If so, then it might be the right time to put your business up for sale as well.
Sometimes, you have to keep in touch with the market for several years before the prices seem good enough to warrant putting your business up for sale. And sometimes, you might put your business up for sale, receive a few offers and still not feel satisfied with what you’re going to get. In that case, it’s a good idea to hold on until you feel like someone is paying you what your business is worth. Don’t settle for a lower price. That said, if you put your business up for sale at the last minute and only give yourself a year or two to find a buyer, you might end up settling. In order to avoid this, consider the following business planning tips:
#1 Stay in Touch with Other Business Owners
You might think that all business owners are in touch with other business owners. But the truth is that most of them get so caught up in running a business that they don’t have time for anything else. It can be an effort to stay in touch with other business owners in your field and related fields. Fortunately, there are many organizations which can help you network and meet other people in your field. Even if you attend only one event per month, you can get to know what’s going on in your industry, meet other people, and find out who’s selling their business and for how much. If you find that someone just sold a business similar to yours for a high price, it might be time for you to consider doing the same.
#2 Subscribe to Industry Newsletters
Staying current with industry news and trends is paramount when it comes to solid and accurate business planning. Another great way to keep in touch with what’s going on in your industry is to subscribe to an industry magazine or newsletter. If there’s a website that will give you all the news you need with regards to your industry, make sure you visit it as often as possible, or subscribe to their e-newsletter. Most news-related websites will send you a daily or weekly email with updates which can give you important information about the selling prices of businesses in your field, as well as trends that can affect what potential buyers are looking for in a business like yours. This will help you figure out if it’s a good time to start thinking about selling your business, and what you need to do to prepare.
#3 Keep an Ear Out
Sometimes, the news about market prices can come to you through unexpected channels. You might hear it from an employee, a friend or a family member. Even if the information is coming from someone who isn’t part of your industry or field, don’t discount it. Do a little bit of research every time you hear anything that might relate to the worth of your business. You might find that it gives you some important business planning information about whether you should be selling, and who you should reach out to when you do.
#4 Compare and Prepare
One element too often overlooked by business owners preparing to sell their businesses is the value of having a completed operations manual. Documented systems could very well be what sets your business apart from others like it, giving you more leverage when it comes to your asking price. You may find that out of several businesses like yours for sale, a select few manage to close a deal in spite of a higher asking price. Expecting your business to sell for the same will depend on several factors including the obvious—active revenue, and the not so obvious—how turnkey your business is for new owners. Potential buyers are going to consider things such as how long will it take to get up and running, how hard it will be to train new staff, and how much clout your brand has, or whether it will need to be rebranded.
Over the course of operating your business or preparing it for sale, how much time have you invested in documenting your business systems and processes? Do you have an established database of complimentary providers and contractors? Do you have any established marketing systems and brand guidelines in place? How easy would it be for a new person, without your experience, to follow your instructions and reproduce your results? These elements make a business more attractive to potential buyers and investors because it means you are selling a system that works, which can be easily reproduced from day one. Most business owners have these systems memorized inside their heads or scattered haphazardly between a myriad of different files and servers. It can seem like a daunting process, but worth it when you consider how much more valuable and attractive your business will be to potential buyers. The good news is that a marketing team can help by processing your rough notes and organizing them into professional documents, manuals and digital files. A marketer will prepare a professional-calibre brand guidelines document for you that will really impress potential buyers. Whether or not you’re preparing to sell your business in the near future, it’s worth taking the time, and hiring the help required to get operations out of your head and properly documented before putting your business on the market. Ideally, consider this business planning step early on, so you can document breakthroughts and successful business practices based on your experiences along the way.
#5 Don’t Hesitate
Many a good deal has been ruined by hesitation on the part of a business owner, even when they know that they’re getting a good deal. If you’ve ever watched the TV show Shark Tank, you’ll know that this is true. Sometimes, if the business owners are lucky, an investor will place a good offer in front of them and ask them to make a decision right away, but the business owners hem and haw. They wait for others to make better offers. They don’t know the true worth of their business, so they can’t accurately identify when they’ve been made a good offer. In order to avoid this scenario, make sure that you know how much your business is worth and how much other businesses of the same type have been going for recently, and why. And if you get an offer that matches that or is even better, then take it. Don’t get stuck in business planning mode when it’s time to take action on a good offer.
#6 Start Planning Early
The sooner you start planning to sell your business, the better. Even the process of selling a business can take some time. The transfer of the reins is going to involve some training, some explaining, and a lot of letting go on your part. The more information you have about the state of the market, the better. You can examine market trends in different ways. Not only can you keep track of how much businesses exactly like yours are going for, you can also do the same for business in related fields. This will give you a broader idea about market trends. Additionally, you can keep track of interest rates from banks. Lower interest rates will encourage more potential business owners to take a loan and buy your business. Plus, you might want to consider the market for other investments such as stocks and real estate. If the stock market or the real estate market is not doing that well, people might be more encouraged to invest their money in a thriving small business.
#7 List Wisely
Last but not least, advertise the sale of your business where potential buyers are most likely to find it. Now that you know where to go for industry and market related news, you can begin inquiring about what your options are for listing your business in industry magazines, e-newsletter blasts, and websites. Also, be sure to reach out to local business banks and credit bureaus. This can be done by dropping off an attractive and informative feature sheet or folder about your business which they can keep on hand and refer to when they meet with potential buyers.
Preparing your business for sale requires almost as much business planning as launching a new venture, but it can be expedited when you have the right kind of professional support within reach.
McAllister Marketing is a full service marketing and branding company with the expertise to help you attract more customers now, and appeal to potential buyers when you are ready to sell your business. Contact us for more great business planning tips and learn how we can help you prepare.