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Tag: Selling your Business

  • 5 Crucial Mistakes to Avoid for a Successful Business Sale | Entrepreneur

    5 Crucial Mistakes to Avoid for a Successful Business Sale | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    After the culmination of years, if not decades, of hard work and perseverance, the process of selling a business will bring many opportunities. But there will also be plenty of challenges, including emotional ones. In the excitement of a sale, many entrepreneurs make critical mistakes that can cost them dearly. Let’s explore five things you should never do when selling your business to help ensure you get the greatest possible deal and protect your interests.

    Related: 10 Mistakes I Made While Selling My First Startup (and How You Can Avoid Them)

    1. Neglecting proper valuation

    One of the biggest mistakes business owners make when selling their businesses is failing to conduct a thorough and accurate valuation. It’s essential to have a clear understanding of your business’s worth before entering into negotiations. Relying solely on intuition or an arbitrary number can lead to selling your business for less than its true value or overestimating its worth, scaring potential buyers away.

    To avoid this mistake, consider hiring a business appraiser or valuation professional. They can analyze your financial statements, assets, customer base and industry trends to determine the fair market value of your business. This valuation serves as a crucial reference point during negotiations and helps ensure you don’t settle for less than you deserve.

    2. Keeping poor financial records

    When selling your business, meticulous financial record-keeping is paramount. Buyers want transparency and reliability in financial data to make informed decisions. Unfortunately, some business owners neglect this aspect, which can lead to suspicion and doubt from potential buyers or even cause deals to fall through. Unfortunately, keeping accounting records on the back of a pizza box won’t instill confidence in the potential buyer.

    To avoid this pitfall, maintain accurate and up-to-date financial records. This includes organized income statements, balance sheets, tax returns and cash flow statements. Make sure your financial records are audited or reviewed by a reputable accounting firm to provide assurance to potential buyers. If your accountant has no experience in exit planning, it’s time to hire a new CPA to work alongside your current accountant. Transparent financial records can instill confidence in buyers and expedite the due diligence process. Keeping these records in a digital vault can speed up and create more confidence with the potential buyer.

    Related: You Sold Your Business. Now What? Embracing a New Chapter with Care and Purpose

    3. Ignoring due diligence

    Due diligence is a critical step in the business sale process, and it works both ways. While you’re evaluating potential buyers, they’re also assessing your business thoroughly. Failing to conduct due diligence on your potential buyer can lead to unpleasant surprises down the road.

    Don’t rush into a deal without conducting due diligence on your prospective buyers. Investigate their financial capabilities, track record and intentions for your business. Are they well-funded, experienced and committed to maintaining your business’s legacy? Engaging with a buyer who lacks the resources or intent to run your business successfully can lead to a disastrous outcome for you and your employees. In addition, many of the purchasers are professional buyers. So be careful not to take on these potential buyers alone! It’s important to get professional help.

    4. Keeping the sale confidential

    Maintaining confidentiality during the sale of your business is vital. Leaks or rumors about the sale can disrupt operations, create uncertainty among employees, suppliers and customers, and potentially harm the business’s value.

    To preserve confidentiality, limit the information shared with employees and only disclose details on a need-to-know basis. Similarly, communicate with potential buyers under non-disclosure agreements (NDAs) to protect sensitive information. Your investment banker or business broker can help you manage the confidentiality aspect of the sale.

    Related: The Secret to a Successful Sale — Expert Tips to Navigate Common Deal Derailers

    5. Neglecting a well-structured exit plan

    Selling your business isn’t just about the transaction itself; it’s about ensuring a smooth transition for all stakeholders involved. Neglecting a well-structured exit plan can lead to chaos, disputes and a loss of value.

    Before entering negotiations, have a clear exit plan in place. This plan should outline the timeline, responsibilities and expectations for all parties, including employees, suppliers and customers. Consider how you will handle the transition of ownership, the retention of key employees and the integration of the business into the buyer’s operations.

    Additionally, consult with legal and financial advisors to address tax implications, estate planning and asset protection strategies. Think about what you’re going to do after your exit, because neglecting this could be your biggest mistake. A well-thought-out exit plan not only safeguards your interests but also helps maintain the business’ stability during and after the sale.

    Selling your business can be a life-changing event, and it’s essential to navigate the process wisely. By avoiding these five common mistakes, you can increase your chances of a successful and lucrative business sale.

    Remember that seeking professional advice and guidance from professionals in the field, such as business appraisers, attorneys, Certified Exit Planning Advisors (CEPAs) and financial advisors, is crucial throughout the entire selling process. With careful planning and attention to detail, you can maximize the value of your business and ensure a smooth transition for all involved parties.

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    Mark Kravietz

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  • 7 Ways to Embrace the Change After Selling Your Business | Entrepreneur

    7 Ways to Embrace the Change After Selling Your Business | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Embarking on the journey of selling a business can be an emotional rollercoaster. Whether you spent years nurturing it or it was a recent endeavor, letting go of something you built from the ground up can evoke a mix of excitement, uncertainty and even a sense of loss. Adding retirement into the mix is a whole other layer of complexity. In fact, one-third of retirees in the United States develop symptoms of depression at this stage of life, which is why preparing for your next phase of life is critical.

    As one chapter ends, another begins, filled with endless possibilities and opportunities for personal and professional growth. Let’s explore the steps you can take to navigate this transition with care and embark on a new path brimming with purpose and fulfillment.

    Related: How Much Time Do I Need to Sell My Business? First, Consider These 7 Factors.

    1. Celebrate and reflect

    First and foremost, take a moment to celebrate your achievement. Selling a business is a remarkable accomplishment, and it’s essential to acknowledge the hard work, perseverance and dedication that went into building it. Reflect on the valuable lessons learned, the challenges you overcame and the impact you made on your employees, customers and community. Give yourself permission to feel a sense of pride and gratitude for your journey.

    2. Embrace change and adaptation

    While the sale of your business marks the end of an era, it also presents an opportunity to embrace change and adapt to new circumstances. Recognize that transitions can be challenging, and it’s natural to experience a range of emotions. Allow yourself the space and time to adjust to this new phase of life, knowing that change often brings growth and personal development. Stay open-minded and be willing to explore new avenues and possibilities.

    3. Reconnect with your passions

    Now that you have freed yourself from the demands of running a business, take the chance to reconnect with your passions and interests that may have taken a backseat during your entrepreneurial journey. One client of mine likes to build furniture and another is into music. Whatever you’re passionate about, rekindling those aspects of your life can bring immense joy and fulfillment. Allow yourself the freedom to explore and rediscover what truly brings you happiness.

    Related: 6 Questions to Ask Yourself Before Selling Your Business

    4. Seek support and mentorship

    Transitioning from being a business owner to a new phase of life can be daunting but remember that you don’t have to navigate this journey alone. Reach out to friends, family and mentors who can provide emotional support and guidance during this transition. Share your thoughts, concerns and aspirations with them. Their insights and experiences may help you gain new perspectives and uncover opportunities you hadn’t considered before. I’ve had clients that needed professional help to get over the loss of not running a business.

    5. Set new goals and challenges

    Humans thrive when they have goals and challenges to strive for. With the sale of your business, it’s time to set new objectives and embark on fresh endeavors. Reflect on your personal and professional aspirations and craft a vision for the future that excites you. Perhaps you wish to explore a different industry, start a new venture or dedicate yourself to a cause close to your heart. By setting clear goals, you can channel your energy and passion into pursuits that align with your values and aspirations.

    6. Learn and grow

    Entrepreneurship is a continual learning experience, and selling your business doesn’t mark the end of that journey. Embrace opportunities to expand your knowledge and skills. Attend workshops, conferences or online courses that cater to your interests. Engage in networking events or join industry-related communities where you can share your expertise and gain new insights. Investing in your personal and professional growth will keep you intellectually stimulated and open doors to new possibilities.

    Related: Cashing Out: What Every Entrepreneur Should Know Before Selling a Business

    7. Find a higher purpose

    Beyond personal and professional growth, consider how you can contribute to a greater cause or positively impact society. Whether it’s through volunteering, supporting charitable organizations or advocating for a particular issue, finding a higher purpose can bring deep fulfillment and meaning to your life. Explore avenues where you can utilize your skills, expertise and resources to create a lasting and positive change in the world around you.

    Selling your business is a significant milestone, signifying the end of one chapter and the beginning of another. As you embark on this new journey, approach it with care, compassion and a sense of purpose. Celebrate your achievements, embrace change and reconnect with your passions. Seek support from your loved ones and mentors and set new goals and challenges that align with your values and aspirations. Remember to prioritize personal growth and find ways to contribute to a higher purpose. With this caring mindset, you can embrace the opportunities that lie ahead and create a fulfilling and meaningful life beyond entrepreneurship.

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    Mark Kravietz

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  • 6 Questions to Ask Yourself Before Selling Your Business | Entrepreneur

    6 Questions to Ask Yourself Before Selling Your Business | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Owning a business is a big decision and choosing to sell it can be just as significant.

    Selling your business comes with many considerations, including the value of it and any financial prospects, what a potential buyer is looking for, if you’re actually done with your business and what you’ll do after it’s sold. If you’re considering selling your business, ask yourself these six questions to assess your options and identify the next best step.

    Related: Selling Your Business? Do These 6 Things Right Now.

    1. Am I ready to sell?

    Start by outlining your reasons for selling. What’s driving your decision to sell? Maybe you’re burned out post-pandemic and you need to get a fresh perspective. Maybe you feel stuck, like a hamster on a wheel who can’t find its way out. In these cases, selling may not be the answer. Consider your goals for the sale and what a positive outcome would look like. It can be helpful to write down your thoughts or list the pros and cons.

    Once you answer these questions, seek an opinion from someone you trust. Selling your business is not just a financial consideration, but it’s also an emotional one. Take time to get to the bottom of what’s fueling your feelings and then get into how it’s done (if you still want to sell).

    2. What is the value of my company?

    As a business owner, you should have an excellent (and realistic) understanding of what your business can get in the open market. My experience with many business owners has been that they value their business at least 50% higher than the actual value. It’s essential to get a third party to evaluate your business.

    You can look into programs that provide a back-of-the-envelope calculation or you can go to a professional business valuator. A back-of-the-envelope estimate typically focuses on the return on investment (ROI), a quick, practical way of reaching a selling price. Although it is universally utilized, an ROI calculation overlooks factors such as time, capital appreciation, risk, potential and inflation, among other factors.

    Utilizing a professional business valuator will provide a more accurate number, which can result from different approaches and considerations (including assets, market comparison, income, etc.). The challenge with this route is finding the right valuator for your business and industry who will charge a fair appraisal price.

    Related: 6 Proven Ways to Sell Your Business for 10x or More

    3. Is knowing the value enough?

    Understanding the value of your business includes more than just how much you should sell it for. To prepare for business transfer ownership, you should organize your finances, including your tax filings, licenses, deeds and profit and loss statements.

    It would be best if you also took inventory of your tangible and intangible assets and any liabilities. Taking the time to outline your business plan and model will benefit you and potential buyers, so they understand the full context of the company and how it generates revenue.

    4. Who will I sell to?

    It’s likely that you will have many alternatives to choose from. For example, you can sell your company to your employees through an Employee Stock Ownership Plan (ESOP), which has many advantages but some hoops to jump through; or maybe you have family members that are capable and want to take on the responsibility of running the company. If you are looking outside your circle, consider an individual investor, private equity firm or strategic buyers.

    5. What professionals will I need?

    It takes a village to sell a company. There are many components and complexities to each deal. The team of professionals you’ll need will depend on the specifics of your business, such as the industry, size and nature. Here are some professional’s business owners will want to have on their exit planning team:

    • A Certified Public Accountant. Look for one experienced in dealmaking to help ensure the sale and transfer are done correctly. There are several tax-related aspects to selling a business and you want to help ensure you’re up on the latest regulations and opportunities for saving money.
    • A Certified Exit Planning Advisor (CEPA). They can help ensure you’re getting the maximum benefits when you sell, and they’ll consider your personal and financial objectives.
    • A Certified Financial Planner (CFP). They can help with the financial aspects of the deal, including what your financial future looks like.
    • A business attorney. They will create legal plans to carry out the sale and look to keep you out of trouble.
    • An estate attorney. There are very big advantages that you can take advantage of in your pre-liquidity planning.
    • A business valuation expert. They can give a more accurate idea of what your company is valued at. That’s if you don’t want a back of the envelope number.
    • M&A advisors. They will look for strategic or financial buyers of your business. They will generally help mid-market and above companies.
    • A business broker. They will contact potential buyers and can screen interested parties for financial ability or other qualifications. They generally help the lower middle market.
    • An insurance professional. They can review your insurance and make alignments based on your needs.

    Some professionals may assist in overlapping areas, but it’s best to use a team approach to help ensure you’ve got the necessary support. Working with the right people will help achieve a successful outcome and a seamless transition.

    Related: Know When and How to Sell Your Business

    6. What will I do after I sell?

    Preparing and understanding what you want to do post-sale is essential for your mental well-being, primarily since most small business owners I know (myself included) are defined by their business.

    They are only looking at their business, growing it and looking to sell the company for the best offer. I ask them what they will do with all the extra time they will have. I get surprising answers such as “I haven’t thought about that,” and “I guess I’ll spend time with my grandkids.” While it’s great to spend time with family, they have their lives and soon you will be looking for other things to do.

    Asking yourself these six questions will likely raise additional questions. Taking time to consider your answer to each question is an excellent opportunity to explore the next steps — whether that’s selling your business or not. Answering these questions honestly and engaging the right professionals at the right time will help ensure that you get the most value for your life’s work.

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    Mark Kravietz

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  • Entrepreneur | 5 Steps to Prepare Yourself for Selling Your Online Business

    Entrepreneur | 5 Steps to Prepare Yourself for Selling Your Online Business

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    Opinions expressed by Entrepreneur contributors are their own.

    Ever wondered how you would go about selling your online business? With endless information on how to start and grow your online business, when it comes time to sell your online business, it’s normal to feel a little stumped. The reality is, the majority of business owners don’t start their new venture with the intention to sell, and if they do decide to exit their business, it’s usually a confidential process.

    So, what steps should you be taking to become more familiar with the process of selling your online business? Read on for five important steps you need to learn today, regardless of whether you’re ready to exit your business or not.

    1. Valuation

    Step 1 is the valuation. A good place to start is by looking at your online business’s last 12 months’ net profit and then multiply this, depending on individual circumstances, from 1 through 5. Based on this model, most businesses realistically sell at a multiply of 2-3.

    For example, if your online business made a net profit of $100,000 in the past 12 months, and you were looking to sell your business for a fair price (based on the net profit it is currently generating today), then you’d be looking to multiply by three, resulting in a valuation of $300,000.

    Of course, you would then need to consider any additional value factors such as stock on hand, operational equipment, email lists, social followings and customer reviews.

    Typically, the higher the valuation, the longer it will take to sell your online business, so you need to be mindful of this. If you are looking for a quicker exit of one to six months, you may need to consider valuing your business off a 1-2 multiply to ensure a faster sale. If you’re happy to realistically keep running the business for the next 12+ months, you could opt for a higher 3-5 multiply.

    Once you have a general idea of what your business could be worth and how much you would be willing to sell for, it’s time to move to the next step.

    Related: 3 Signs It’s a Smart Time to Sell Your Online Business

    2. Where to list

    Deciding where to list your online business will directly impact your final walk-away price, so it’s essential to have a solid understanding of your listing options. The two most popular options are:

    • Broker sale: Brokers will offer support in helping you value your business and set the sale price. They will handle the entire sale process and vet potential buyers on your behalf. This is ideal if you are time-poor or you need the extra sales support. The downside to this option is brokers often require a substantial up-front fee (which doesn’t guarantee a sale) plus a high success fee, normally around 20% of the sale price. For smaller businesses with valuations less than $500,000, this could significantly impact the profit you make from the sale. However, for online businesses valued at $500,000+, enlisting the help of a professional broker may be necessary to reach higher net worth buyers.

    • Flipping websites: Flipping websites are online marketplaces for buying and selling businesses. They work similarly to a brokerage in the sense that there’s a listing fee and a success fee, but the fees are often significantly less (with listing fees starting as low as $49 USD). You can also choose the level of assistance you require, making the whole process tailored to your specific needs.

      • With free valuation tools and built-in tech to sync data directly from your online store, accounting software, etc — the whole process is extremely user-friendly. Most platforms also provide same-day support, ensuring a smooth and safe transaction for both buyer and seller.

      • Reputable flipping websites include Flippa and Empire Flippers, so if you are eager to begin planning your exit, research these popular marketplaces and compare them against any brokerage firms you may be considering to ensure you list in the right place for your business.

    3. CC someone you can trust

    Selling your online business requires a lot of time and energy. For this reason, it’s always a good idea to keep another person in the loop that isn’t as heavily invested in the sale. This will help to provide an outside perspective on any tough decisions during the sales process.

    There may be a lot of back and forth with your broker or potential buyers, so having someone close to you who knows your business well, is level-headed and has your best interest at heart CC’d into all communications will be a game changer. Let them know you value their opinion, and if they have strengths you know will aid the sale, don’t be afraid to let them step in if required.

    Related: 5 Tips to Successfully Sell Your Company

    4. Consistency is key

    The majority of businesses realistically take 6-12+ months to sell, so it’s crucial to maintain “business as usual.” Letting your finances, operations or marketing efforts slip because your mind is already starting to think of what’s next is a quick way to hinder the sale.

    Having standard operating procedures (SOPs) in place across all areas of your business will help clearly outline your current systems and processes to serious buyers in the final stages of negotiation. An organized backend can add thousands of dollars to your final sale price, so it’s definitely worth the extra effort to prepare SOPs well in advance.

    5. Post-sale support

    Last but not least, it’s important to mentally prepare yourself for post-sale support. Unlike selling a car or house, most new business owners will expect you to provide a period of support post-sale. So, once you’ve finally found your buyer, don’t expect to be jumping on that plane just yet!

    Post-sale support can be negotiated as a short-term contract (usually 3-12 months) where you’re paid a handover salary, separate from the sale price, to stay on and support the new owner with all tasks until they find their bearings.

    Alternatively, the buyer could ask to withhold a portion of the sale amount in Escrow to ensure you continue to assist them throughout the agreed-upon support period. Although post-sale support is not legally required, offering some form of post-sale support as part of your listing will significantly boost your chances of a successful sale.

    While selling your online business can feel overwhelming, following the steps above will ensure a smoother sale and help you achieve the best price possible. Staying up to date with the latest trends and strategies as well as podcasts like Female Startup Club will guide you to understand the current marketplace and gain the insights you need to make that perfect exit.

    Related: How to Sell Your Business for 10x or More

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    Doone Roisin

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