So, the moment has come to evaluate your business as a whole and figure out if it is worth selling. With the right moves, could it become something great in the future? Or, would liquidation be a safer solution?
You will have to look at the value of your business beyond its material components, because as time has passed you have added tangible and intangible value. The reputation of your business and its customer base have both contributed to the creation of something greater than the sum of its parts.
Below you will find six steps which will help you determine if your business is worth selling:
- Check the financial documents of the business
In order to make sure that your business is in good financial condition, you will need to check your finances, including your sales and profits over the years. As long as your gains exceed your debts, you are on the right path. A simple way to see is by subtracting your purchases, expenses (including the businessman’s salary) and income tax from your total income. Then, we can compare that number with the total amount of sales and the total capital invested.
- Determine how your business is different from its competitors
Look at the products and/or services that your business provides. Buyers are attracted to a business that provides something unique and different from its competitors. You can accomplish this by offering products and/or services that stand out to consumers.
Other aspects of your business that make it different from competitors are its commercial viability, its brand and its reputation. How well known and respected a business is within its particular market is an important part of its total worth; your commercial brand needs to be recognisable. You should also have a strong internet presence on social media platforms as well as an effective marketing program. Based on ISO 10668, in order to make a correct evaluation of a brand, you have to examine it from three different perspectives: legal, behavioral and financial.
- Examine your location and facilities
If we assume that your business is located in a real-world location and its goods and services are not available exclusively through the internet, this, too, can affect the prospective sales of your business. When the time comes to sell your business, it is a good thing if its physical presence is in a well-frequented area or somewhere geographically central with a constant stream of customers.
Additionally, the overall image you present to potential buyers will have to be good, including physical facilities and equipment at the location where your business is based. These all need to be up to date and to function without any problems. Usually, buyers feel more secure knowing that whatever lease involved is long-term and transferrable.
- Determine the worth of your staff and customer base
If you are thinking of selling your business, some basic information you will need to take into account is both your staff and customer base. A trustworthy and experienced staff with contracts easily transferrable to a new owner as well as clear staffing policies outlined in an employment policy handbook make a business even more attractive in the eyes of the buyers. Trustworthy staff and management can significantly contribute to a smooth transition to a new owner.
A large customer base as well as the existence of important customers with long-term contracts are serious advantages for any business. Keeping a steady customer database that can easily be transferred to a new owner will contribute to a smooth transition and immediately sets your business apart from others, most of which are unable to manage this.
- Recognize the areas in which your business could be improved
Once you evaluate the condition of your business, determine in what areas you might be able to make improvements so that your business will be more profitable. Create a list of particular improvements for each possible weakness in your business. Then, figure out how much time it will take to implement your plan so that you have a timeline by which you can make all the necessary changes.
- Decide if you should sell now, later, or liquidate
Now that you have determined the value of your business, sales potential and you have created a plan of action with a timeline for improving its sales prospects, you have in your possession all of the necessary information that you need in order to make an informed decision about how to proceed.
Depending on the current state of your business and your willingness to devote time and effort to improving it, you have the following options to consider:
- The ideal scenario is to discover that your business is in good condition and ready to sell and so you can put down an asking price with certainty on account of its profitability.
- You may discover that your business needs improvement in order to get a competitive price when it goes on the market. For various reasons, however, you may be determined to sell it in its current state. The decision is yours alone to make, but take into account that your sale price will likely be lower than if you had completed the needed improvements.
- Otherwise, you can follow the plan of action that you created above knowing that you may delay the sale of your business, but in exchange you will have more interested buyers and possibly a higher sale price.
- Finally, you can decide that the state of your business makes it uncompetitive in the market and it is not worth trying to improve it. In this case, you should choose to simply liquidate the estate.
Selling a business is a demanding process that requires a professional approach, especially given the amount of information and choices that will need to be made. The contribution of a professional regarding the finances of your business will be able to carefully direct you in the right direction. Business Interval is here to help, ready to offer you our invaluable experience, so that you can achieve the best results.