The need-to-know information if you’re planning to sell your business.

If you’re planning to sell a business, these seven tips will help you prepare for the transition and maximize the selling price.

Be ready to explain why the business is for sale

Potential buyers will want to know why the business is for sale. Typical reasons include retirement, burnout, health problems, death, divorce and disputes among partners. Being candid about why you want to sell will help establish trust.

Be honest

It’s best to be straightforward with how you present your business. Assume that buyers will do their due diligence. If they find inconsistencies they’ll perceive more risk, which could reduce how much they’re willing to pay or nix the deal altogether. Disclose material facts up front.

When to sell a business

It’s better to sell a business at a time of your choosing rather than being forced into a sale. For example, in a family business where the adult children don’t wish to take over the business, it’s better to have an exit strategy.

It’s also a good idea to sell a business when it’s profitable as opposed to when it’s facing financial troubles.

Strategic business owners prepare as much as three years before a sale.

Gather and prepare documentation

One of the key things potential buyers will scrutinize are financial records. Consumers’ Business Banking Online makes it easy to download statements. Be prepared to share financial statements and tax records for at least the last three years. Additionally, make sure your books are in exceptional order.

In addition to financial documents, prepare an inventory of property and equipment that will be included in the sale. Make sure equipment is in working order or plan to repair or replace it before the business is listed for sale. Gather copies of leases for property or equipment.

Write an executive summary of how your business operates. Provide an overview of the financials. Describe your strengths, services, products, systems, and future opportunities. The executive summary will be an integral part of marketing your business.

How to value a business

There’s no single way to place a value on a business. Assets after debt, multiplying a seller’s discretionary earnings by a factor between 2 and 3.5, and market comparison are three methods. The type of business you have will influence which valuation method to use. Research what’s used in your industry or consider consulting with a qualified business appraiser who can determine the value of your business.

Remember, financial formulas don’t tell the whole story. A solid reputation can boost the value.

Know what buyers want

Key things business buyers look for include:

• A profitable business with consistent income
• A robust customer list
• Established long-term contracts for future income

Also consider how much involvement you’re willing or able to provide after the sale closes. Buyers often want the former owner to serve as an advisor during a transition period.

How to find a buyer

Some businesses find a buyer from those closest to them: their employees and customers. In other cases, competitors buy businesses to quickly grow market share.

If you don’t have a ready buyer for your business, a business broker can help facilitate a sale. Fees vary by business value; expect to pay between 5% and 15% for a broker’s services.

Do you have business banking questions? Contact our knowledgeable Commercial Loan Officers online or call 800-991-2221. We’re also available to help in person at your local office.

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