6 Strategies for Selling a company

Posted on Posted in Blog

Sell your company now with Business For good , the best platform for maximizing company value and selling price. Sign up how to access their personal network of 20, 000+ buyers netting a $30 billion cash pool.

For most creators, selling a business (or part of it) can be a bittersweet experience. Allowing go of some thing you’ ve spent years building is definitely challenging.

When you’ re such as many entrepreneurs, the thought of “ cashing out” and reaping the particular rewards of your effort is also very attractive. And moving forward with the next chapter in your life (which you only get so many of) can be very exciting.

These days we’ re likely to show you six of the very effective strategies for cashing out, so you can be assured you’re getting the best deal you can.

Quicksprout.com - how to sell a business using these 6 strategies

The particular 7 Best Company Brokers for Offering a Business

Depending on your specific needs, there are a few different types of business agents that can help you market your business. After vetting countless brokers, listed below are the seven best:

  • Business Exits — Perfect for Maximizing Business Worth and Sale Price
  • Woodbridge International — Best For Creating High Demand and Multiple Bids
  • Peterson Acquisitions — Best For Quick Business Valuations
  • Synergy Company Brokers — Great for Buying Industry-Specific Companies
  • Transworld Business Advisors — Best For Buying a Franchise
  • Sunbelt Business Brokers — Best For Selling Companies With Low Annual Revenue
  • Calhoun Companies — Best Business Agent For Commercial Real Estate

1 ) Make Sure You’re Marketing The Right Way For YOUR Corporation

The best way to make a plan when selling your organization involves evaluating the kind of company you’ re selling. The right selling strategy can vary wildly depending on your business’s type, size, sector, and revenue degree.

Are you offering:

  • An ecommerce business?
  • A dropshipping business?
  • An Amazon FBA business?
  • A brick-and-mortar shop?
  • A franchise?
  • A portfolio associated with websites?

Some businesses are much simpler to sell than others. For example , an e-commerce business that’ h doing well is usually much easier to sell than a brick-and-mortar business.

This is because simple: most customers are looking for businesses along with high growth possible and little downside risk. An online ecommerce business that’ ersus already profitable plus growing ticks each of those boxes rapidly.

Brick-and-mortar companies also carry other liabilities with them, like employees, rent or even property taxes, and other overheads. These can quickly become deal-breakers for customers who are looking for a low-risk investment.

Promoting a Small, Medium, or even Large Business

The size of your business will significantly impact the particular sale process as well. Small businesses, which operate at under fifty dollars million in income, are usually sold using a different process than larger enterprises.

The main reason is that a lot more buyers are willing to purchase a small business outright. The total amount of money required to purchase a small business is much lower than that of a larger business.

As such, the buyer pool for small enterprises is usually much broader than that of a larger company.

This is good news for small businesses proprietors who are looking to market. It means that you’ ll have more audience to choose from, and a better chance of finding the right fit for your business.

For larger companies, you’ ll require the help of an investment financial institution or a business agent. The process of selling a substantial company is usually a lot more complex and needs a higher level of expertise as a part of your technique.

Strategies for offering a smaller business include:

  • Supplying a strategic buyer
  • Selling to a financial buyer
  • Selling to management/employees
  • Listing your internet site on an online market

Offering a larger business, however, usually involves:

  • Hiring a great investment bank
  • Running a formal auction process
  • Connecting with private equity firms

Selling an Online Business

Online businesses can be evil profitable, or they can be a total flop.

The good news is that customers are usually more interested in internet businesses that are profitable and have a solid growth flight.

The reason is easy: these businesses tend to be much less risky and have a greater potential return on investment (ROI).

As such, you should expect to receive a higher multiple for your business if this falls into this category.

There are a few key things you’ ll want to incorporate into your strategy to increase the value of your business:

  • Ensure your company is actually profitable. This may seem like an obvious point, but you’ g be surprised with how many businesses are marketed that are actually losing money.
  • If your store is not profitable, you’ ll likely have to accept a lower provide from a buyer.
  • Focus on development. Buyers are interested in businesses that have the to grow quickly. If your business is stagnant or continues to be declining in recent months, you’ ll likely need to accept a lower offer as well.
  • Diversify your revenue streams. Buyers are usually more interested in businesses which have multiple revenue avenues, as this reduces the overall risk of the purchase.

The best options for selling an online business include the following:

  • Auctioning your blog on a site such as MicroAcquire or Flippa
  • Cool outreach to find a proper buyer in your specialized niche
  • Social networking on social media

Selling a Brick-and-Mortar Business

The process of selling a brick-and-mortar business is normally much more complex compared to that of an online business.

Since most brick-and-mortar businesses require a few level of physical existence, it’ s often difficult to find a purchaser who is willing to buy the business outright.

As such, you’ lmost all likely need to work out a sale having a potential buyer.

The best way to sell the brick-and-mortar business is to hire a business broker. A broker will help you to find a buyer, and will also bargain the terms of the sale on your behalf.

Another option is to seek private equity investment for the partial buyout of the business. This can be a good option if you’ lso are looking to cash out several of your equity but nonetheless maintain a stake in the company.

Some strategies for marketing a brick-and-mortar company include:

  • Hiring a business broker
  • Looking for private equity investment
  • Running a official auction process
  • Selling to an organized buyer in your niche

second . Decide If You’ lso are Selling the Entire Company or Just a Part of This

Most techniques involve some level of this decision-making process, but it’s also crucial that you consider it as a standalone strategy. Deciding whether or not you want to let go of the whole business is a main consideration that requires plenty of strategizing and believed.  

In the case of smaller businesses, this doesn’ t usually make sense to sell only a part of the company. However for larger enterprises, it’ s often necessary to sell only a part of the business.  

This is usually done for one of two reasons:

  • The business is too large to be sold overall, so the owner chooses to sell off the division or part.
  • The master wants to keep the stake in the corporation and continue to grow it.

In the case of many SaaS startups, for example , the CEO and co-founders will often sell the minority stake within the company to raise development capital. This allows them to keep a managing interest in the business while also cashing out there some of their equity. The same is true of agency proprietors, ecommerce and direct-to-consumer (DTC) brands, and other businesses that have successfully scaled to a sizable revenue base.

There are also several reasons to sell an entire business:

  • The organization is not meeting growth targets, and the owner wants to cash out.
  • The company is mature, and the owner is ready to retire.
  • The business operates in a declining industry, and the owner desires to get out before factors worsen.
  • The owner is no longer interested in running the business plus wants to move on in order to something else.

For businesses which have done well and show upside potential, it’ s common designed for founders to sell a number stake while retaining a minority placement. This allows them to cash-out some of their equity while still having a state in how the organization is run.

On the other side of the coin, there are plenty of people who begin or buy businesses just to scale all of them, sell them, plus move on. This is specifically common in the case of online businesses like blogs plus affiliate sites.

The key here is to determine what you want to do with your company and then structure the particular sale accordingly.

If you’ lso are only selling a part of the business, you’ lmost all need to specify which assets and financial obligations are included in the selling. This can be a complex process and will require the help of a lawyer or accountant.

3. Determine Your Business’ s Value

This is the million-dollar question (literally). And it’ s one which doesn’ t come with an easy answer, sadly. But there are some steps you can take to get a general idea of your business’ h value.

The first thing you need to do is build a list of all the property and liabilities which are included in the sale. Including everything from accounts receivable and inventory to real estate and patents.

You’ ll also need to create a pro forma profit plus loss statement for the past three years. Doing so will provide you with a good idea of the business’ s earning energy and growth possible.

Once you have all of this information, you can start to build a valuation design, which will help you figure out how much your business will be worth based on various factors such as revenue, cash flow, growth potential, and risk.

There are several different methods you may use to value a company, but the most common would be the following:

The Discounted Cash Flow (DCF) Method

The DCF method is one of the most frequently used way to appraise a business. The principal it’ s based on statements that a company will be worth the totality of its future cash moves, discounted at an appropriate rate.

Screenshot of the discounted cash flow formula with mathematical equation.
Business valuation using the DCF technique.

To value a business with the DCF method, you’ ll need to estimate the firm’ s future cash flow plus discount them back to the present day.

The particular Multiples Method

The multiples technique is another common way to value a business. It’ s based on the guideline that a business may be worth a multiple of a primary underlying monetary metric, such as income, earnings, or EBITDA.

Screenshot of business valuation us the multiples methods.
Business valuation utilizing the multiples method.

The many method is based on enterprise value, which is the sum of a company’ s equity value and its particular debt. To calculate the value of a business utilizing the multiples method, you’ ll need to find out what similar businesses have sold for and then apply a multiple to the metric you’ re using (revenue, profits, EBITDA, etc . ).

The Generating Power Value (EPV) Method

The EPV method is the variation of the DCF method. It’ t based on the principle that a business is worth the present value of its future income, discounted at an appropriate rate. It is mainly used for businesses that issue stock since it’ s better than the DCF way for businesses with high debt levels.

Screenshot of the earning power value method with example data.
Business valuation using the EPV model.

To calculate the significance of a business using the EPV method, you’ lmost all need to forecast the particular company’ s long term earnings and lower price them back to todays.

Other Factors That Impact Business Value

Of course , money coming in and out isn’ t all those things you should consider when you’ re trying to worth your business. There are a number associated with other factors that can influence the value of a company, which includes:

  • The industry the business is in: Particular industries are more valuable than others. Plus certain types of companies require different strategies. If you’ re selling an ecommerce brand, for example , you’ ll want to construct an online personal brand and network along with other DTC founders plus private equity investors in the space. In some cases, they might even approach you to purchase your business without you needing to go outreach.
  • The level of participation from the CEO: If you’ re a solopreneur, chances are your business isn’ t valuable unless of course it’ s completely autonomous. And if you’ re a originator who plays a major role in its brand name, selling it in order to someone else will cause its revenue to drop (or disappear). To maximize your business’ s value—especially as a digital entrepreneur—build your personal brand upon social media by displaying your audience how you run your business along with minimal involvement.
  • The level of scale: “ Scale” will not equate to “ a greater number of employees” or even “ greater income share. ” In the simplest terms, “ scale” equates to the total amount you can increase your result without adding additional costs (e. gary the gadget guy., employees, production machines, marketing spend, and so forth ). When selling your business, be sure to concentrate on how efficient plus scalable your business design is.

4. Decide How You Want to Sell the Business

Once you’ ve decided to sell your business and have an idea of how much it’ s worth, you’ ll need to decide how you want to that. There are several different options available, each with its personal pros and cons.

Using a Business Broker

If you’ re not sure how to start selling your business or even don’ t possess the time to do it yourself, you can use a business broker.

Business brokers are professional middlemen who else help buyers plus sellers of businesses find each other and negotiate deals. They will typically charge a commission of 5-10% of the sale price.

Selling to a Strategic Buyer

A strategic buyer is a organization that’ s within the same industry because the business being sold. They’ re typically trying to acquire businesses in order to expand their business, enter new marketplaces, or add new services and products.

The main advantage of supplying a strategic buyer is that they typically pay more compared to other types of purchasers since they’ lso are looking to acquire the business as a means of furthering their own bigger-picture objectives.

Strategies for locating strategic buyers include:

Networking using them on the social media platforms they hang out upon: Chances are, your buyers will use social media on some level.

Listing Your Business Online

Selling your business online using a web site like Flippa or even BizBuySell is a easy process. You’ ll need to create a list for your business, including information about the company, along with photos and videos (if you might have them).

Screenshot of Flippa's marketplace webpage.
Live listing page on Flippa.

As soon as your listing can be live, it will appear in a scrollable feed with information such as the asking price, revenue multiple, and earnings multiple. If a buyer will be interested in your business, they’ ll contact you to definitely discuss further details.

Once you’ ve reached an agreement, the buyer will pay a deposit (typically 10% of the asking price), and the escrow procedure will begin.

The primary advantages of selling your business online are that will it’ s fast and simple. And since these platforms offer escrow protection, you don’ t have to worry about obtaining paid.

The downside is that you’ lmost all likely get a lower price for your business given that buyers on these types of platforms are typically looking for bargain deals.

Selling to Your Workers

Another option for selling your business would be to sell it to your employees. This is known as a worker stock ownership strategy (ESP).

With the ESP, the company’ s employees buy shares of the company from you, typically using a loan from a bank. Sellers who use this method don’ big t need to find a purchaser, but they do have to be willing to give up several control over the business.

An ESP provides several advantages, including tax breaks as well as the ability to keep the company in the family.

But it’ s i9000 not right for everybody. For example , if you’ re looking to retire soon or if you don’ t think your employees will be ready to run the business, then selling to your employees might not be the best option.

5. Prepare for Negotiation

Prepping just for negotiation is critical, specifically if you plan to sell to some private equity firm, that will try to get because favorable of a offer (for them) as you possibly can. This can be a complicated process, so it’ s i9000 important to have a very clear idea of what you want (and what you’ lso are willing to give up) before you start.

Some things to consider during the settlement process include:

  • The price of the business: Get multiple private valuations ahead of time, which means you know what your company may be worth, then cross-reference every valuation. Then, type in the negotiation knowing precisely how valuable it is, and don’ t take anything less.
  • The payment terms (e. g., all money up front or obligations over time): If someone offers you all money up front, it’ s i9000 a better deal for you and other shareholders mainly because you’ ll have got less liability and quick access to your whole share of the organization. If your buyer would like to pay over time, make sure to add more towards the price.
  • The construction of the deal (e. g., stock sale, asset sale, and so forth ): In an asset purchase, you’ re marketing off individual assets within the company. Within a stock sale, you’ re selling gives of that company. From the tax liability standpoint, asset sales lead to higher tax liability for the seller. Stock sales are more beneficial because of the lower capital gains rate, however they require you to give up your patents and mental property. If this stuff are a part of the offer, they should also generate the sale associated with the business up in negotiation.
  • Who will result in any outstanding financial obligations or liabilities: If you pay off the debts for the business (should you might have any), your business turns into much more valuable. When buyers approach you in negotiation, be sure to harp on this.
  • What, if any, limitations will be placed on the customer after the sale: If you need to sign a non-compete contract or another contract that restricts your ability to make money on your expertise for a period of time, you should negotiate a higher selling price. Pitch companies on your opportunity cost of selling it with no competing and their own added benefit of having one fewer expert competitor in their industry.

You’ ll also need to choose what, if anything at all, you’ ll use in the sale. For example , will you sell the business as is, or are you going to include inventory, machines, or other assets?

You’ lmost all also want to think about what, if any, restrictions you’ ll place on the buyer following the sale. For example , such as the ability to compete within your market or non-compete clauses.

It is best to prepare for any issues that may arise throughout the negotiation process too, such as:

  • One or more stakeholders are usually misaligned on the search terms of the deal.
  • The buyer attempts to lowball you to the sale price.
  • Someone back out of the deal in the last minute.

If you’ re not sure how to bargain the sale of your company, there are plenty of resources available to help, including textbooks, articles, and online courses.

6. Structure Your Buy Agreement Carefully

Once you’ ve reached an agreement with all the buyer, it’ s time to complete the particular sale. But this technique involves strategies of its own, and most of them revolve around how you construction the deal and get ready for what comes next.

Your buy agreement document outlines the terms of the sale, including the price, transaction terms, and every other conditions that have been decided. Once the purchase contract is signed, the customer typically pays the deposit (usually a percentage of the sale price). This deposit is usually held in escrow until the sale will be complete.

  • Dividing your own assets: In some business product sales, the buyer will choose to retain some resources (or keep the royalty from them). This is usually the case designed for successful products with utility patents which have proven valuable for your business. Carefully think about which assets are important to you and which usually assets you want to get rid of, and clearly document them in your buy agreement after considering the pros and cons of each.
  • Retaining your own liabilities: If your business face any debt or even liabilities, you’ ll need to figure out how to proceed with them ahead of time. Presuming certain liabilities may leave you open to lawsuits further down the line, and when your goal is to forget about your business and move on to your next chapter, your best bet is to pay off your financial obligations and hand over any kind of legal ramifications to your new owner in advance.
  • Transferring ownership: This usually involves transferring the particular business’ s property (e. g., stock, real estate, equipment) and liabilities (e. gary the gadget guy., contracts, leases) towards the buyer. When structuring your purchase contract, you’ ll want to weigh the good and the bad and structure your deal accordingly.
  • Utilizing legal counsel: Closing the offer usually takes place in a lawyer’ s workplace, where the final documents is signed and the balance of the selling price is compensated. To ensure you’ lso are getting a

Once the sale is certainly complete, you’ ll need to update your records with the condition and local governments. You’ ll also want to notify your own employees, customers, suppliers, and other business partners that you’ ve sold the business.

Final Thoughts About Promoting Your Business

Marketing your business is a large decision, and it’ s not some thing to be taken lightly. It takes strategy at every level of the sale, and there are several nuances that will be specific to your company.

But if you’ re ready to move ahead, it can be a great way in order to cash in on your hard work and start anew. To obtain a better idea of exactly what your buyers might be looking for, check out our website post on how to buy a business to see what it’ s such as from your buyers’ perspective.

And if you would like to learn how to start a business with hopes of the exit, follow the step-by-step guide.

Spread the love

Leave a Reply

Your email address will not be published. Required fields are marked *