If you have a successful small business, sooner or later you’ll consider selling it off, along with all its worries and responsibilities. You might fantasize about living the rest of your life in an exotic tropical paradise. Remember, though, that the degree of care and effort you put into the sales process could have a huge impact on the price you receive for your business and how long it will take to complete that sale and leave you free to pursue your pleasures.
You might not even think your business is saleable. But you could be surprised. If you’ve been running your business for a couple of years or for even one year, and are making a small profit or have a clear road to making one, it is probably very saleable.
Even If Your Business Isn’t Profitable, It Could Still Sell
One of the first businesses I created was selling a simple map of the island of Nantucket.
I hired my then-12-year-old brother to trace a large public domain map of the island obtained from the state government highway department. Then I typeset larger, more easily read road names and had my brother paste them on the map. Next I hired a student artist to draw images representing a dozen historical sites. I then printed and starting selling the map. The whole process took about two weeks.
When I realized sales were slower than I anticipated, I made an appointment with the owner of a Hy-Line Cruises and convinced him to buy the whole thing as part of an on-going business.
This is an example of how your business may be more saleable and more valuable than you think. If I can sell a business after investing about 14 days of work into it, imagine what the potential for selling your established business might be.
It’s probably going to take a lot of time and effort to sell your business for a good price. Anyone who makes an offer is going to demand a tremendous amount of information regarding its operation. You are going to have to determine how much information about it you want to divulge prior to the sale. You are going to have to spend an extensive amount of time with prospective buyers explaining the ins and outs of your particular business.
Selling a business for a price you deem fair and equitable isn’t a sure thing. Many people place their businesses on the market and later decide not to sell because they either don’t receive any offers or don’t receive any offers they consider to be acceptable. Throughout the selling process you should be prepared for the possibility that an appropriate buyer may not come forward.
But remember that it will be necessary for you to continue to devote enough energy, time, and other resources to maintaining the business in good shape. You must also carefully weigh the impact of sharing the news that the business is for sale with your employees, customers, vendors, bankers, and other people with whom you do business.
Since selling a business also involves a lot of legal issues, you will need to consult with an attorney before you prepare your prospectus, which typically describes the state of the business right up to the time the sale closes.
When Do You Want to Start Preparing to Sell a Business?
From the day you start your business, you should be thinking about selling it. Yes, even if you are 100 percent sure you will never sell your business and you will keep it in your family forever, you still want to design your business from the ground up with an eye toward selling it someday.
Why? Because preparing and designing a business to be saleable also helps to design it for the creation of long-term value, not just short-term profits. It helps you think about what you are creating that makes your business different, that adds value long term, that makes the business more sustainable, that makes the business less risky.
Another example: I started and ran a mass distribution job-advertising newspaper in the Boston area, reaching a peak circulation of 175,000 copies . But as soon as this business became unprofitable, when the economic cycle went south, I immediately tried to sell it. When that was not successful, I shut it down.
This was not a saleable business. There was nothing of significant proprietary value. We had no paid subscribers and we had to pay massive printing and delivery costs to reach our audience. Furthermore, the business was hypercyclical. These were all factors that made the business of little value to prospective buyers.
When the business was losing money, no one wanted to buy it. And because the business would never sell for a good price, it is a business I should not started. This contrasted with my book publishing business, my map businesses, and my internet sites; that even if they had been losing money, they would still have been very saleable businesses and would have had significant value to a competing player who could have benefitted from their attributes.
So thinking about selling your business is really something you want to start considering even before you decide which business area to enter.
You also want to have at least two, if not three or more, really solid years of running your business before you even consider putting it on the market.
Takeaways You Can Use
- Your business may be more saleable than you think.
- You may not find the right buyer right away.
- You should always run your business with an eye toward improving its saleability – even if you never plan on selling it.