How-to Start the Process of Selling a Business

Selling a business is a complex process, but if your plan is solid, you’ll have an easier time and increase the chances of a sale. Here, you’ll learn the most important steps in a business sale.

Preparing a Business Summary

The first part of preparing a business for sale is to create a summary. Business summaries are 10-20 page documents that answer every buyer’s most pressing questions, and they’re often emailed to potential buyers who’ve already signed NDAs (nondisclosure agreements).

Ideally, a business summary should be created by a professional with sales experience. While it’s possible to create your own, it’s often difficult for business owners to understand their companies’ weaknesses and strengths. By hiring a pro, you’ll get a fresh perspective and the benefit of their years of experience.

Aggressive Marketing

In preparing a business summary, you should have already identified the perfect buyer. Knowing your target requires a deep understanding of your company and your field. Should the buyer have industry experience? If so, consider advertising in trade publications. If experience isn’t a necessity, it’s best to employ multiple marketing tactics, such as:

  • The direct approach, through faxes, emails, and phone calls. This strategy works best for higher-value businesses, and ideally, you should ask a third party to make initial contact so as to maintain confidentiality.
  • Advertising to others in your field. As said above, trade magazines are a great place to start. Here, buyers typically pay less because they already have experience.
  • Approaching outsiders. This is one of the most common methods used by brokers, but it can work for you as well.

Buyer Screening and Sending a Selling Memorandum

One of the most serious mistakes you can make as a business owner is to not screen potential buyers. You’ll get most of your inquiries via email, and the right way to handle them is with a template that encourages them to sign an NDA before receiving a summary. This approach encourages buyers to take the next step, and it will weed out those who aren’t serious.

Meet With Buyers

Next, you’ll email the summary to qualified buyers, and perhaps make a follow-up phone call. Wait for them to call back; if they’re serious and they like your company, they’ll come after you. If a buyer emails questions, it’s okay to give answers, but it’s equally important to set up a face-to-face meeting. If they’re not ready to come to you, they may not be the right fit.

Accept the Offer

If the buyer is committed, they’ll make an offer. It’s not necessary to hire an attorney until you’ve gotten some key terms accepted. Be sure the buyer has the funding before getting too deep into the negotiation process, and consider asking for proof of financing along with the offers they submit. Accepting an offer requires mutual due diligence; if the buyer’s digging into your finances and your background, you should be doing the same thing. It might seem intrusive, but it’s a crucial step.

Closing the Sale

Along with the due diligence process, closing a sale should be part of the routine. With timelines and checklists, you’ll keep everyone organized and ensure that things move forward. If this is the first time you’ve sold a business, it may be beneficial to get outside help with closing.

Parting Thoughts

Selling a business is a difficult decision and it shouldn’t be taken lightly. A successful sale requires in-depth planning, aggressive marketing, research, and due diligence on both sides. By preparing in advance and following these tips, getting your business ready for sale becomes much easier.

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