By: Unstoppable Branding Agency

Selling a business doesn’t happen overnight. Many key considerations must be made by business owners wishing to sell their businesses to achieve maximum profit and a smooth sale. Andrea Bell, profit and growth expert and CEO of Profitability, specializes in helping business owners set up for success when they decide to sell their businesses.

“When it comes to selling a business, there are three key things that need to be kept top of mind: profitability, ownership position, and efficiency,” explains Bell.

Profitability

Profits are the lifeblood of any business and must be optimal before a successful sale can be attempted. “The number one thing would be to make sure that the profits of the business are maximized and that you can demonstrate to a potential buyer that the business is not expense-heavy,” says Bell. “We work to ensure that profits are maximized by looking at areas such as marketing, production efficiencies, and getting all the accounting in order. You must be able to show potential buyers good financial statements for at least two years before the sale. They will want to see what the business is doing – is it growing, improving, or shrinking? If you don’t have good financial statements in order, don’t worry; a good accountant can help you pull these together. Another aspect that a potential buyer will want to see is that you were able to pay yourself and that the business will be able to pay someone to take your place.” 

Ensure all accounts are up to date, taxes are paid, and current liabilities are taken care of. There is nothing worse than discovering too late that something was overlooked. Reviewing financials with an accountant or other financial advisor will also help verify any potential discrepancies, as well as provide valuable insight on pricing the company for its true value. “ small actions can help you make big improvements as you implement them in several important areas within the business,” shares Bell.

The Position of the CEO

The ownership position is also crucial when selling a business. Before deciding to sell, it is essential to understand how you, as the CEO, can exit the business. “It is important to consider whether you are an integral part of the business or if you have already put measures in place to delegate down,” says Bell. “One of the questions you must ask yourself, and potential buyers want to know, is, would the business fall down if the CEO were to leave? There are two ways in which a CEO can move out of the company. If you have put measures in place to move out of the integral parts of the business, thereby allowing it to still function, you may be able to sign the sale paperwork and be done with it. If you are still an integral part of the business come sale time, an agreement could be reached whereby you agree to stay on as an employee or consultant for a set period to allow for the handover to and training of the new owner. Before the sale, you need to decide which of these two options you are willing to commit to and then take action to make them happen.”

Efficiency

Finally, efficiency needs to be maximized across the board so that the business runs smoothly during and after the sale. This includes reducing costs where needed, ensuring all processes and procedures are up-to-date, customer service is top-notch, and utilizing technology whenever possible to make operations more efficient. “Even a 1-10% improvement across three major areas in the business can increase profits exponentially,” explains Bell. “Imagine the impact if you could bring in 10% more sales, decrease your expenses by 10%, and increase efficiency by 10%. Small changes really can make a big difference. If you struggle to see how this can be done, hire a professional who can provide a fresh perspective.”

“One final bonus piece of information I want to share is that potential buyers love to see recurring revenues, and signed contracts are even better. Being able to show these things to your existing customers will ensure that revenue is still coming in even once the business has changed hands. Signed contracts give the new business owner confidence that those clients will remain, and your sales price will reflect this,” shares Bell.

By keeping these three key elements in mind, selling a business can be done successfully, with minimal stress, and can be very profitable. This allows you to achieve financial freedom from the hard work you put into creating and growing your business.

Published by: Khy Talara