Selling a business is often a challenge, which means owners who don’t prepare in advance are likely to be at a disadvantage when marketing a business. To avoid problems, the majority of experts recommend sellers take time to learn about these five steps to sell your business in Washington DC.
1.) Always Plan Ahead
While there will be times when it’s not possible to prepare a marketing plan ahead of time, most owners will have a year or two to get ready for a sale. Advance planning allows sellers to set the stage for a sale properly. In most cases, owners will explore ways to make their business more attractive to buyers well in advance of announcing their intention to sell.
One important step in the planning process is determining just why you’re selling. Since there are several ways to market a business, understanding the core reasons for the sale may impact the marketing strategies employed.
Timing is also a crucial factor when marketing a business. Tax implications and market conditions determine when a business should be offered for sale. When time allows, it’s a good idea to work with a team of experts to evaluate all factors influencing the sale before deciding when to begin the actual sales process.
2.) Determine the Market Value of Your Business
Few business owners understand how business marketing professionals determine an appropriate price for a business. There are different approaches when establishing a price for a business, and the best strategy will depend on the type of business, whether real property is involved, and both local and national industry trends.
When determining the value of your business, seek input from your business broker, accountant, and attorney. While a business valuation expert may use different valuation approaches to reach a final estimate of value, there may be other factors to consider before moving forward with the sale process. Take the time early in the process to understand why your business should or should not be priced using a specific valuation approach.
Remember that factors like the condition of real property, inventory levels, long-term contracts, and patents will all factor into determining a price. Intellectual property also has value, which means reaching a final asking price may well become complicated.
3.) Operate Your Business to Maximize Profits During the Sales Process
Business buyers expect to turn a profit from day one. Yes, there are buyers who specialize in turning around ailing companies, but most investors want to see an immediate return on their investment. That means paying attention to all day-to-day functions while a business is for sale will be important. Maintaining all equipment and real estate will be crucial, as buyers don’t generally want to deal with deferred maintenance after a closing. In some instances, it makes sense to upgrade equipment to ensure there are no slowdowns in productivity.
While it’s tempting to reduce staffing levels to improve the bottom line, that’s not generally a good idea. Doing so may make it difficult, if not impossible, to meet production goals, and both employee and customer satisfaction levels may suffer when cuts are made.
4.) Do Your Part to Sell the Business
Although a business broker will be handling the marketing activities when it’s time to Sell your business in Washington DC, it’s up to the seller to provide all the information needed to attract a buyer. Brokers generally review what sellers should expect during the marketing process, but it’s important to prepare for unexpected questions from prospective buyers as well.
Many buyers will want to know if you’re willing to assist with the transition process, as you’re the expert on how things work and what will or won’t need changing to maximize profits and improve efficiency levels throughout the organization. However, don’t make promises without consulting your business broker, accountant, and attorney, as there are implications to be aware of if you remain in place during the transition.
In addition, don’t “puff,” as exaggerating the company’s attributes could create issues later. Be as honest as possible when a prospective buyer asks questions. Again, if there are things you’re hesitant to share, discuss how disclosing those items could impact the sale with your broker, accountant, and attorney. However, refusing to disclose important facts could lead to issues and the loss of a solid prospect.
5.) Have a Plan in Place for Life After a Sale
Most sellers invest a great deal of time and effort developing their businesses, and having a plan for life after a sale will directly impact them once the transaction is completed. In some cases, sellers may be moving on to another business rather than retiring, so It’s important they understand when and how the finalization of a sale will influence their future options.
If you’re retiring, some advisors may recommend playing a role in financing the sale to limit tax liabilities. Sellers may relish the idea of remaining in place during a transition period to make it easier to gradually adapt to retirement. However, there are regulations with some types of financing that limit the amount of time a seller may stay onsite after the sale.
Your accountant and attorney should be consulted to determine how and when sale proceeds should be collected, as your retirement fund could suffer if proper protocols are not followed. Even if you’re transitioning to another business opportunity, how the proceeds from a sale are collected can impact both current and future tax liabilities.
Planning to Sell? Get Started Today
Even if your plan is to sell in a year or two, now is the time to contact a business broker for advice. Marketing a business is rarely easy, which suggests evaluating your options now so adjustments can be made is the best course of action. Your business broker will listen to your goals, ask pertinent questions, and recommend a procedure to follow over the coming months.
Rather than waiting until the last minute, invest time now in determining how and when to market your business. Conditions in the Washington, DC area are evolving, and a business broker will be the best source of information when it’s time to plan the sale of your business. Plan to follow these five steps to sell your business in Washington DC.