12 Questions to Ask When Selling a Business
Note: A clearly written article with a good overview of some of the key questions to consider when selling.
1. What Do I Need to Do Before Finding a Buyer?
When you’re preparing to sell your business, preparation is the key. You’ll need to eliminate as much debt as you possibly can, gather all of your important financial documents for potential buyers to analyze, and discover any potential weaknesses. This will help you maximize the overall value of your business and speed up your sale process.
Pay Off Business Debt
The more debt you can pay off the better your financials will look to potential buyers. Showing debt on your books might turn off a lot of people from even considering the business. And for those interested in the business even with the debt, they’ll typically offer you a lower purchase price than if the debt wasn’t there.
There’s a good chance that you’ll be asked by the buyer to pay off any debt with proceeds from the sale anyway, so you might as well take care of it now. It might make cash tight until you sell, but this is actually beneficial since it’ll force you to tighten your company’s budget, increase your working capital, and therefore increase the business’s overall valuation, offsetting much of the cash you use to pay off the debt.
Organize Financial Information
Experienced buyers want to see that you’re prepared for the sale before they take a look at your business. You’ll need to make sure your books are clean and look good. You should also provide projections of at least 3 – 5 years, showing future opportunities for the business to succeed. If you can’t give them the financial information they need or get it for them quickly, they’ll likely move on to the next opportunity.