OK, you’ve decided to sell your business. But how do you find a buyer, one who will pay you what your business is worth? Selling a business is much like selling any other product, and you have to think of your business this way.
Here are some pointers for finding a qualified buyer:
- Develop a marketing plan. Determine what media outlets you will use, such as trade and consumer publications. Make a list of all your friends and contacts who may either be interested in buying a business or know someone who is. Determine if you will use a business broker or sell the business yourself. Without a plan, you will be simply spinning your wheels, so write down all the steps you will take to find a buyer.
- Join business organizations and associations. Contact local business and networking organizations that can help get the word out. In addition, consider joining trade associations that offer free advertising to their members. The members of these associations may also be a pool of potential buyers.
- Create a selling memorandum. This is one of the key tools for promoting your business. The memorandum should start with an executive summary that tells potential buyers the key elements of your business. Provide a list of your products or services and an overview of the industry. Be sure to list all assets and financial information, including projections of future earnings. Finally, the memorandum must address the issue of why you are selling the business. Be sure to put positive spin on why you are getting out.
- Be aware of the types of buyers. People buy businesses for different reasons, and this will affect how you pitch your business to them. Strategic buyers consider how buying your business might fit into their long-range plans. They are often larger businesses that want to enter a new market or offer a new product. If you have what they want, they will generally pay more than other types of buyers. Financial buyers are more interested in your company’s profitability and stability. Some want a more or less turnkey operation that will take little oversight. Others may specialize in quick turnarounds; that is, they buy a business, tweak it, and then sell it for a profit.
- Explore the option of selling to employees. Your employees may also be potential buyers. There are pros and cons in selling to them. Employees may be willing to pay more than a financial buyer would because they understand the business and their risk is reduced; however, they might not have the money to buy your business outright. This means you may have to finance the sale yourself or arrange third-party financing.
- Advertise to the general public. Although you may reach more potential buyers, this approach can be risky. If employees know the business is for sale (to someone other than them), they may be less motivated and the quality of their work can suffer. Also, key employees may leave. Your customers may look for other suppliers and your vendors may cut off your credit. Any of these events can negatively impact the perceived and real value of your business.
- Consider using a broker. Selling a business is much more difficult than selling a home, and it has more legal issues. A qualified commercial real estate broker or business broker can help you avoid costly problems. He or she can also contact people looking for a business opportunity, including your customers and competitors, without disclosing the name of the business until an interested party is found. Using a broker will help you avoid the dangers of advertising and free up your time to make your business more profitable and appealing to buyers.