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How To Sell A Business Privately

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After you’ve spent many years building your business and you’re ready to exit and sell for a high multiple, it can be challenging to find the best buyer and deal. However, it is possible to find a fantastic buyer on your own and you don’t need to use an expensive broker that will take a large chunk of your earnings. With that said, we will now look at how you can go about selling your treasured business privately as well as a few tips to help you do so successfully.

The very first thing you should do is find out the value of your business. This is essential since you don’t want to use a guesstimate since you’ll likely either scare off buyers or cheat yourself by selling for a price that is much lower than your business is actually worth. So, it may be best to use a business valuation company that will actually value your business for you. There are actually numerous business valuation and advisory firms that you can hire, but it is best to choose one that has a great deal of experience valuating the type of business you have. Once you hire one of these companies, they will review your sales, profits, inventory, assets, debts, overheads, competition etc in order to complete their valuation. To give you an idea of what you can expect, most small to medium businesses are valued approximately between 3 – 6 times their yearly income. However, there are many factors that will determine valuation.

Next, it is very important that you clean up the financials of your business since most buyers are doing a great deal of due diligence before purchasing. You can do this by working with an accountant who will organize your business’s financial data so that you can present these to prospective buyers. This should be done for at least the last 3 years and all income and expenses should be accounted for.

Once your business is properly organized, you can start looking for buyers. One way to do this is to simply put a for sale outside of your physical business or even on your company’s website. You will be surprised by how many people will actually contact you about buying your business. However, you should always pre-qualify your potential buyers. One of the largest reasons why most deals don’t go through is because the buyer doesn’t have the funds available. This is certainly a waste of your time and energy and you definitely want to avoid dealing with tire-kickers. So, you can ask potential buyers for proof of funds or you can ask for pre-qualification letters from their bank or other financial institutions. You should also pre-qualify potential buyers on whether they are a good fit for your business. This means they should have some sort of experience running a business and even your type of business. If your business is your baby, then you may also want to get a buyer that actually has a vested interest in your business and will actually grow and nurture it.

Next, it is necessary that you also get your business contracts organized. When selling a business, there is a lot of legal paperwork to be done. You will need to get an asset purchase agreement, various legal contracts, intellectual property contracts and more. It will likely be quite confusing, especially if you’ve never done this before. So, it may be best to hire a lawyer who specializes in business sales and they will ensure you have all of the necessary paperwork and contracts.

You will also need to determine the type of sale as well as whether you still want to play a role in the business or not. It is possible to consider deals where you stay on in a consulting or advisory position either permanently or for a set period of time. This can actually help you to attract a lot more qualified buyers because they will have the help needed to ensure the business is transferred successfully and they have all the help they need to make their newly purchased business successful.

To wrap things up, we have just looked at how you can sell a business privately and a few considerations you need to keep in mind. These tips will definitely help you to sell your business and make a quick and easy exit.

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