Are You Selling A Business? - Make Sure that You and Your Business are Ready

Having an exit strategy right from the beginning is a good idea but not everyone begins with the end in mind.  Most businesses focus on growth and most often, the business’ sustainability.   This is because for some, selling a business is would also mean failure in some aspect.  Nowadays however, selling a business is  in itself a strategy for financial and personal growth. This most especially true for people who are start-up or idea oriented and are less inclined to manage or oversee daily operations.

                Selling a business is also not something you decide upon overnight and decide to put the business up for sale the next day.   Business brokers would say that selling a business successfully takes at least a twelve month long preparation process.  This is because you will need to have at least a year of successful operations that reflect on your business and financial records.  These records should also be verifiable along with the any other document you are to provide your business broker with.

So here are a few insights on the preparations you need to make in selling a business. It is most ideal to start preparing on or before the beginning of a fiscal year.

·         Be a banked business. There are businesses who do not deposit all their cash sales in the bank.  If you decide to eventually make graceful exit by selling, it is best that the business’ profitable run is recorded both by your in-house books and the bank.  This ensures that the true value is well documented.  This makes it easier for you and your business broker to sell at a profitable outcome.

·         Standardize and document your processes – standardization helps daily operations to run smoothly.  Operating manuals should be available no matter how small the business is.  Buyers would be more willing to pay a higher price for businesses that are run well and that the transition between owners will not jeopardize the end products or the services delivered.  It also helps keep regular customers because they know that they will get the same service even if owners have changed.

·         Create a long term business plan if possible – an existing long term business plan gives buyers an insight into a brighter future for them.  Decision making on the part of the buyer is made easier too.

·         Consult with the experts in selling a business – this would mean you should really talk to your business broker regarding your concerns.  Their advice before you “jump ship” is valuable and would mean a better business sales outcome. 

Types of Small Business Loans

According to a recent study, small businesses are less likely to seek any form small business loans from financial institutions.  There are varying reasons for this which includes the fact that most small businesses lack the necessary documentation and necessary banking and credit history that these financial institutions require.  Still others find that acquiring small business loans will have a forced outcome (in terms of profit/sales) rather than having it grow naturally.  Nonetheless, a small business loan, when managed well, opens a lot of possibilities and opportunities.  And there are different sources of funding depending on your need and how much risk you are willing to take as an entrepreneur.  Remember that Apple Inc. started in a small garage in California. Here are types of small business loans for specific needs.

·         Government Financial Assistance – These government loans are industry specific and you may only apply if your business or products is one of the Government’s top priorities. The application is time consuming and approval is not guaranteed.  Only a few small business take this option

·         Credit Cards – The easiest way to obtain cash or small equipment to fund small business needs.  This is usually short term and incurs high interest rates especially if payments are kept at minimum level.  There are quite a number of small businesses resorts to credit card because of its convenience.   And credit card companies reward their user with higher credit limit the more often they use the card.

·         Secured Bank Loans – Loans with appropriate collateral usually in the form of chattel or property.  This type of loan requires a lot of documentation and may not be appropriate especially if the collateral’s value is much higher than the required funds.

·         Unsecured Loans – These are personal loans that are secured by checks or projected future profits.  This type of small business loan requires top credit score and extensive banking history.

·         Merchant Cash Advance - This type of small business loan is does not require extensive documentation and approval is based on projected credit card or debit card sales. Payment is done by assigning a certain percentage of the sales to the financing company.  Payment is made directly through the EPTPOS system where it is automatically deducted and sent to the financier’s account.

Small businesses usually expand or innovate their product line after a year of successful operations.  For start-up businesses which did not require the need for a small business loan, it would eventually need it to keep the business growing at a steady pace.  It is important to know what your options are even if you have no need of it right now.  

Top 5 Mistakes You Can Make When Selling Your Business

 

Business owners have different reasons for deciding to sell.  Fortunately for business owners, they have an option to plan an exit strategy anytime – this is why it is good to undergo annual strategic planning and financial evaluation with accountants and auditors. But just because you have the best laid plans and because you know how to run a business even if it is in sales, it does not guarantee the best possible business sales outcome.  Here are some of the mistakes that are often made when selling your business.

·         Overvaluation and undervaluation - You may have a good grasp of the value of your business or your company.  The pitfall lies in being too subjective. Most owners fail to look at their business in the perspective of a buyer and too much in how much they value their businesses (or how much they need the cash now).  So they either overprice or underprice. Overpriced businesses deter prospective buyers which prolongs the whole process. Underpriced businesses also give the wrong impression to prospective buyers and if you do close the deal, you’ll probably walk away happy now but regret your decision later.

·         Not taking the time to prepare – Selling a business is very much like selling a house.  It is not enough that you make it look in order, but it should be in order and it should look “lived in”.  Take the time to create a business portfolio that is attractive to investors and you have to make sure that the facts and data are verifiable – from cash flow to client and supplier database.  You should have a working business plan that your buyers (and their investors) can look at.  Most buyers will need the help of creditors and your business portfolio should look good for them as well.

·         Selling too soon or too late – Start-up businesses are particularly harder to sell especially if it has not yet reached its full potential.  Putting up a business means you are also willing to put up with the risks. There are those who sell instead of having to face these risks and leave while the getting is good.  There are those who just are too stubborn to let go and decide when it’s too late and when there is little to gain after the sales.

·         Not practicing full disclosure – this one can get you in a lot of trouble including a lawsuit.

·         Selling the business on your own – this is the worst you can do, especially at a time when the market is almost entirely dictated by the buyers.  Business brokers are partners who you cannot forego when selling your business.  Not only are business brokers equipped to give you sound advice to prevent the previous enumerated mistakes, they also have the resources to help you get the best possible deal within the best possible timeframe.