If you’re thinking about selling your small business this year, you’re not alone. According to Walker Deibel's Build Then Buy: How Acquisition Entrepreneurs Outsmart the Startup Game, around $7 billion worth of small and medium businesses (SMBs) currently held by Baby Boomers, what some have called the “greatest wealth transfer in history” is looming large on the horizon in the next decade. Whether you’re in the Baby Boomer boat or interested in selling your SMB for other reasons, here are a few questions to consider as you think about taking the leap.
1. Do you have a team behind you?
Selling your business may be more complicated than you initially anticipated, especially if you’re planning on going it alone. Sure, maybe independence sounds ideal, but building a network of people you trust to crowdsource ideas can make a world of difference. For example, you’ll need brokers and lawyers who you trust to help you find the right buyer, negotiate a deal, structure your transaction, and tackle legal hurdles. More informal mentors and fellow entrepreneurs can help to gut-check you on day-to-day questions. Being able to leverage these people in your network can be incredibly helpful in helping you navigate the deal process, so you can focus on continuing to run your business in the meantime.
Having a “team” might sound like an intimidating concept, but the people to best lean on are often found in your immediate network. Your team can be people in your local community or people you’ve met online through LinkedIn or other social networking platforms. Personally, my network has been built almost exclusively through Twitter! If you’re a member of any local business organizations, reaching out to members when you need support can only help you make the right decisions for your business as you prepare to sell.
2. Do you know how to find the right buyer?
The profile of people interested in buying small or medium businesses is shifting. While in decades past, your HVAC business might have sold to an industry insider or a close friend or relative, today there is a huge influx of post-corporate and post-military entrepreneurs specifically looking to purchase SMBs.
Keep in mind that the right buyer for your business may have little to no experience in your industry – but might instead be someone who’s a great entrepreneur and leader looking to use their skills to continue building on the momentum of your business.
A business sale takes time, so there’s absolutely no reason to rush into finding the right buyer; focus your research on potential buyers interested in capturing your SMB’s momentum in your existing market. Websites like Acquire and BizBuySell offer many resources to help you get started on finding the right buyer for you.
3. Is now the right time?
Many people have arbitrary timelines for when they want a business deal to close. For example, in 2022, my firm had around 10 deals set to close on December 30th – a great way to cap off the year, sure, but that might not be the best time for your business to sell.
There are many things to consider when it comes to timing: market valuations, employee payroll, revenue numbers, and more. Along with all of these things comes the minutiae of business ownership: making sure your financial records are in order, putting together statements that show profit and loss and market interest, and more. It bears repeating that selling your SMB isn’t something you should rush into – and not just from a paperwork perspective. If you’re having trouble knowing where to start, lean into your network and consult a trusted professional or a mentor for help.
4. Do you have a post-exit plan?
Handing off your business to relax and retire sounds like a dream, but do you have your next move in mind? SMB owners should know exactly how they plan to wind down their involvement in a company once they sell – and, even better, have a contingency plan in place should the sale not work out quite the way you imagine.
Before selling, research and take some time to recalibrate your financial goals. Prepare for the money you’ll need to pay on the sale of your SMB, put together a succession plan for who will take over the day-to-day of your business, as well as an understanding of the pitfalls and pain points – and how to manage them – and outline a plan for your family finances once the sale goes through.
Preparing to sell your SMB can be the start of a great new adventure, both personal and professional. That said, there’s a lot to consider before starting the process, and it’s not something to be taken lightly. By working with a trusted team, preparing well in advance to find a buyer and identify the right timing, and planning for your exit, you can help set yourself up for long-term success – and a lucrative sale, as well.
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