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Selling a small business can be a complex venture involving a number of considerations that may require the services of an accountant, broker or attorney to conclude. The process is likely to be a time-consuming one and, once the sale is complete, decisions will need to be made regarding handling any resultant profits.

Preparing a Small Business for Sale

The first part of the process is assessing how appealing the business is to potential buyers. Things to consider include whether the business has a loyal, growing customer base and whether profits have been increasing consistently. It is also important to consider whether the company holds a strong position within the market and the extent to which there is potential to expand.

As part of preparing a business for sale, the owner should organise its records, contracts and paperwork, make sure its accounts are up to date and resolve any ongoing disputes.

Valuing the Business

Entrepreneurs like Volker Hartzsch, who has built and sold 19 companies in 22 years, know that the next stage of selling a small business is valuing it. As well as its assets, buyers are likely to assess the business’s revenue, staff, liabilities, reputation and more, which can make settling on a sale price tricky. A popular approach when it comes to valuation is to deploy the price to earnings ratio. This process gives a prospective buyer an indication of whether they’re likely to make their investment back within a certain timeframe.

Finding a Buyer

Many small business owners undertake this step as if they’re marketing their business. This could involve creating a sales brochure to appeal to prospective buyers and highlight its growth potential. If there are potential buyers within the owner’s networking circle who may be interested in buying the business, these could be approached – otherwise, a business broker can take care of the task of finding buyers.

A buyer will be likely to want to negotiate on the sale price, and it’s best to be prepared for this. To this end, the price should be set to allow for some movement, although it’s important to have a minimum price in mind.

Once a buyer is found, they will require due diligence to be carried out. They may wish to look at elements such as the business’s intellectual property, financial documents and business insurance, so it’s vital to be prepared for this ahead of time.