The process for selling a business can often be overwhelming and confusing. Everything from setting an asking price, finding a buyer, and negotiating a deal while still operating your business can be fraught without guidance or help along the way. In our experience, when there are businesses that are listed for sale and don’t find a buyer, it’s often for one of several common reasons. The good news is that most of these issues are fixable and can be avoided if addressed ahead of time!
Ideally, business owners will plan for the sale of their business when they start their business or at least several years in advance to allow time to plan their exit and ensure they maximize the value of their enterprise. Even if you aren’t considering selling your business in the next few years, it’s still worth obtaining a business valuation. A valuation, even if you aren’t quite ready to sell, can serve as an important benchmark to determine the true value of your business. After the valuation is complete, you will know how your business might fare when listed for sale and you will be able to address any weaknesses that might be in the way of you obtaining a higher sale price. It’s never a good feeling to be ready to sell your business only to find out it’s worth a fraction of what you might feel it’s worth. In our firm’s last article, we went into detail about business valuations. Click here to read more about what goes into a business valuation.
This important preparation lead time will enable a business owner not to just get their business ready for sale, but to ensure they are ready to list their business when market conditions are favorable. There are times when certain macro-economic conditions can adversely affect the broader business-for-sale marketplace. The last thing a business owner wants is to be in a position where they feel like they have to sell, but the timing isn’t right. We recommend that business owners take the approach that they are going to run their business forever even when they decide to sell to make sure they are in the best position to review offers when the time comes.
Our firm had a recent client who initially contacted us in 2021 looking for information on how to sell their IT business based in Northern Virginia. We helped them understand what buyers look for when purchasing a business like theirs, including: ensuring they had a diverse mix of clients so there wasn’t major concentration with only a handful of customers, that their client contracts were assignable and had new long term agreements in place, to be sure they had accurate financial data for their business, and for the owners to delegate the sales and IT Service work. We came to market in late 2024, fielded over 150 inquiries from interested buyers, and had over 10 offers in just a couple of weeks after listing the business for sale. The business sold in early 2025 for almost 17% above asking price! This client benefited from pre-sale planning, fine tuning their business, and engaging with a business broker before they were ready to sell. The result was a very high level of interest and a quicker than average sale time for above asking price.
Business buyers will want to review financial documents, tax returns, employment agreements and payroll files, client and vendor contracts, and point of sale reports (if applicable) to verify that any information presented to them is accurate. A business owner will need to spend some time making sure their books and records are in order before buyer due diligence takes place. Business owners can work with a business broker to also get their business pre-qualified for a SBA loan prior to listing their business for sale. This will not only help with marketing the business, but also with addressing common questions that might be raised by a lender.
As a business owner, make sure your business is ready to run when you are out of the picture. Businesses that are entirely reliant on the owner, one key product, or perhaps a major customer or two can be a turn off to prospective buyers as they fear performance will drop off significantly once the owner departs. A business owner also needs to offer a transitional training and support period to the buyer as well. The exact time and duration often depends on the complexities of the business and experience of the buyer, but should allow the new owner to feel more comfortable when they finally take over. Another effective tool for business owners looking to sell that generally instills buyer confidence is to offer some form of seller financing. The amount of seller financing might be as low as 10-20% of the sale price, but can help facilitate the transaction depending on the circumstances of the sale.
Lastly, whether you are planning to buy or sell a business, we always recommend seeking guidance. A knowledgeable business broker can assist you in setting a price, determining when is the right time to sell, preparing the business for sale, confidentially advertising and marketing the sale, negotiating with prospective buyers, and recommending advisors for any legal or financial issues that need to be addressed. Please contact us today if you are interested in speaking with someone from our team.
