There comes a time in every entrepreneur’s life when they need to exit their business. Maybe you’re planning to retire or move onto a new, exciting venture. Whatever the reason, you’ll need to sell your business to start your next life chapter.
But even if you’re sure leaving is the right decision, you don’t want to let the business you’ve worked so hard on go for pennies on the dollar. Here are some tips to help you sell your business for maximum price so you can feel good about the deal.
Here’s How to Sell Your Business for Maximum Price
Get a Professional Business Valuation
Numerous factors that determine the value of a business include location, earnings history, reputation, and growth prospects. Calculating what your business is worth isn’t easy, so it may be best to bring in a professional to give you an accurate estimate. This evaluation will help you determine where you are and figure out what you need to do to get the price you want for your business.
Sell On a High
You may only think about selling your company when business is slow. But investors are more likely to pay a premium for your business if things are going well and profits are high.
If your revenue has been steadily increasing over the past few months, it may be an excellent time to sell. Receiving positive press or signing a big client can also boost the perceived value of your business and entice investors.
No one wants to buy a business that has messy books and bad processes. That’s why it’s crucial to get organized. Evaluate the way you do things and see if you can maximize your efficiency.
Don’t be afraid to invest in software and other tools that can improve your workflow—you’ll likely get your money back when you sell. The goal is to make your business easy for investors to take over so you can get top-dollar for it.
Work on Boosting Profits
Businesses usually sell for an average of one to four times their annual net profit, so it’s worthwhile to work on increasing your sales. Digital marketing is a low-cost way to boost your revenue. Creating an email newsletter and offering special discounts to people who sign up can improve your customer retention. Running digital ads and posting on popular social media sites like Instagram and Facebook every day can help new customers find you and fall in love with your products.
Pay Down Debt
Debt is a liability that could negatively affect your company’s value and scare off potential buyers. Ideally, your company’s debt-to-income ratio should be 36% or less. If you’re carrying more than that, it’s a good idea to work on paying off any loans you took out or liens against your company’s assets.
If you don’t think you can make a dent in your debt without the proceeds from the sale, you can add a debt payoff contingency to the purchase agreement. This can make potential buyers feel more confident about purchasing your business because they know they’re starting with a clean, debt-free slate.
You’ll need to put in some work to sell your business for the maximum price. But when you see the zeroes on the purchase agreement, the effort will be worth it.
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Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.