How to Sell a Small Business for Good Profit

How to Sell a Small Business for Good Profit

Taking a few simple steps will be valuable to both the seller and the buyer, making the transaction minimally disruptive to all those involved.

Unless you are approached with an unsolicited offer you should have an idea in advance of why you want to sell the business and target not only the right buyers but also have a good idea of what sort of terms you would ideally want. With an understanding of why you want to sell the business, you can then have better conversations with the appropriate professionals.

During, or shortly after answering why you want to sell your business question, you should begin working on developing and selecting the right professionals that you want to work with.

More than likely as a business owner you may already have an established relationship with an attorney, accountant, and investment banker, but if not or if they aren’t suited for your transaction, you can talk with peers and others who have been down this path before.

A local association of business brokers or a chamber of commerce can often be an excellent source for referrals. Once you have identified the business professionals you should be prepared with adequate documentation, this will not only speed up the process but it will add to your business’s credibility. Among the documentation make sure to have the following items:

  • Historical financial statements and tax returns for the past two years ideally they will have been audited by a CPA, but if not at least have them reviewed for reasonableness
  • Forward financial looking financial statements and the underlying assumptions for 3-5 years
    Customer documentation and contracts
  • Business entity documentation

As part of preparing both the historical and forward-looking financial information, look for ways to make minor adjustments that will increase your existing businesses’ performance and value. Most likely you will uncover subtle changes that can put significant money in your pocket.

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