Selling a business is a complicated process. Simplify the process with a plan, and increase your chances for a successful sale. To sell your business fast, execute your plan well.
The seven steps to sell your business fast in 2020:
Step One: Prepare a Business Summary
A Business Summary reduces wasted time with buyers by more than 90%, based on our experience selling hundreds of businesses. A Business Summary ensures a smooth, professional sales process, can increase the value of your business, and may reduce post-sale litigation.
A Business Summary is a 10- to 20-page overview of your business that answers key questions every buyer asks. You email it to interested buyers after they sign a non-disclosure agreement (NDA) . More than a mere document, the Business Summary is part of an overall business sales strategy.
Ideally, a professional broker, who understands what buyers look for when buying a business, should prepare the Business Summary. A professional offers perspective and experience. As the owner, the Business Summary is difficult for you to write – you ARE your business – and it can be difficult for many business owners to objectively assess their business.
A broker can also help you strategize your business marketing for the sale, help you determine a price range, assist with structuring a deal, aid when reviewing key documents, identify potential deal killers, and make important recommendations. This advice is priceless.
Preparing a Business Summary is the foundation of the entire process of selling your business. All other steps depend on step one.
Step Two: Market your business aggressively
When preparing your Business Summary, you will identify your ideal buyer. Knowing your ideal buyer requires a full understanding of your business and your industry. To sell your business quickly, don’t rely on one method alone to attract buyers.
Does the ideal buyer need experience in your industry?
- If so, you should advertise in trade publications and other media read by business owners and investors in your industry.
- If not, you can employ a wider range of marketing tactics to attract buyers.
Once you identify the ideal buyer, you must create a plan to attract that buyer.
There are three general ways to find buyers:
One: Approach them directly through phone calls, email or fax. This approach works best for businesses valued at more than $1 million. You need a list of names and contact information for targeted potential buyers. Ideally, a third party should contact the potential buyers, so you can maintain anonymity.
Two: Advertise your business for sale throughout your industry. This includes advertising in trade publications, magazines and other media that targets your industry. Industry buyers usually pay less for a small business (priced less than $1 million), because they have experience and are less likely to see value in the training you may offer them (i.e. goodwill ) . Brokers seldom advertise businesses this way; there are high costs associated and generally, businesses advertised this way receive low offers. This may be the best option for businesses in certain industries that require a buyer with specific experience, such as medical, law, engineering and other professional services. A third party should field any inquiries to maintain your anonymity.
Three: Advertise your business sale outside of your industry. Business brokers most commonly use this method, especially including print and web media. Traditionally, print media includes newspaper advertising, which is expensive and ineffective. Web advertising can also be expensive, unless you are a broker. There are 15-20 standard and popular websites that brokers use to advertise and sell businesses, most of which charge a high subscription fee. For the most exposure possible, to sell as quickly as possible, advertise on as many of these sites as possible. However, the cost can easily exceed $1,000 per month.
Step Three: Screen buyers and email them your selling memorandum
The most common mistake business owners make when selling their business is not screening buyers.
Even when they do screen buyers, most sellers do it incorrectly.
Most buyer inquiries come through email. The proper way to handle these inquiries is simple: Prepare an email template to use for buyer inquiries. Typically, serious buyers will ask additional questions and want more information. This is normal. Include basic information about your business, and request the interested buyer sign a non-disclosure agreement (NDA), before you send them your Business Summary.
The Non-Disclosure Agreement (NDA)
Lead the buyer to the next step, which is to sign your NDA. Include a copy of your ad, so that buyers remember what they responded to. Your email should be short and simple, with a line that mentions that you have a complete Business Summary available for interested buyers who sign an NDA.
This approach will immediately eliminate people who are not serious about buying a business. Buyers who aren’t sufficiently motivated will not sign your NDA.
Your NDA should be simple. Don’t make the mistake of asking someone to sign multiple documents and fill out lengthy forms before they ever see any of your business’ information. At this point, the goal is to screen buyers for motivation and money.
Ask buyers two key questions on your NDA:
If the new business owner needs experience in your industry, also include that information. Save yourself and the buyer time and focus on the criteria that really matter.
Step Four: Meet with qualified buyers
Email your Business Summary to buyers you determine are qualified. We recommend calling the buyer along with sending the email; make it a quick, friendly call to tell them that they can contact you, any time, with questions.
Wait for interested buyers to call. Don’t chase buyers down. If a buyer likes your business and is serious, they will follow up with you.
If the buyer emails you a few follow-up questions, then answer them. If the buyer emails you a long list of questions, then set up a meeting. Do not email back and forth. Sale negotiation is a dancing act, with a heavy emotional investment, as well as the financial investment. If the buyer will not meet with you, in person, after seeing your Business Summary, we recommend that you do not waste further time.
If the buyer insists on receiving additional information without meeting (giving responses such as, I am too far away, or I am too busy, or I just need a little more info), then ask the buyer to submit additional information to you, such as a resume, financial statement, or credit report. At this point, the process is give-and-take, and if they are asking for something from you, keep it even by asking for something from them.
As you provide more information, screen the buyer more thoroughly. Screening should be a gradual, natural process, although there are no hard-and-fast rules.
Circumstances differ, but most serious buyers will make an offer after meeting between two and three times. Use your judgment as you meet with buyers and determine their level of commitment.
Step Five: Accept an offer
Have a professional involved in the process of offer negotiation; they will point out potential pitfalls and facilitate the process.
Ask the buyer for an offer. Be persistent. If the buyer is serious, they will make one. At this stage, you do not need an attorney to draft an offer. Focus on establishing agreement between both parties on key terms, then you can have an offer drafted.
You want to make sure the buyer is financially qualified, before you negotiate. Ask that the buyer submit proof of funds along with their offer; few buyers are willing to disclose personal information before they are truly interested.
If you accept an offer, be sure that all due diligence is mutual. You have a right to inspect the buyer’s background, financial condition, and more, allowing you to retreat from the offer if you find something problematic with the buyer.
During due diligence, be clear about the buyer’s expectations. Over half of deals die during due diligence. Why not know how stringent the buyer’s requirements are before accepting an offer? Ask for a due diligence checklist.
Be organized for due diligence. Use the checklist and prepare copies of the necessary documents.
Step Six: Manage the due diligence process
Due diligence should be a routine process, if you are adequately prepared. Stay on track, be organized, keep a checklist and keep the momentum going.
At some point, the power will be in the buyer’s hands. Buying a business is not without risk. A buyer can only minimize risk; risk cannot be 100% eliminated.
Offering financing for the sale can offer you some leverage during due diligence, because you can ensure the buyer that you are being fully transparent. Eventually, any misrepresentations you made would surface, and the buyer may be able to use those against you.
Professional brokers review businesses and identify potential ‘deal breakers’. Brokers also create a custom due diligence checklist for you to use to prepare your business for due diligence during offer negotiations.
Step Seven: Closing the business sale
Closing the sale should also be a routine process. The key to success, again, is preparation.
Prepare for the closing weeks in advance. Keep the momentum moving and keep all parties organized with checklists and timelines. Take action daily toward the closing. We highly recommend that any business owner who has not managed the process of closing of a business before use professional help.