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Selling your business is a big decision that yields big opportunities. Regardless of your reason for selling, a solid plan is crucial.
At Business Funding Group LLC (BFG), our team collectively has several decades of experience helping business owners make business moves with the help of Small Business Administration (SBA) financing.
The following 10 steps to selling your small business are intended to guide business owners considering a sale. Feel free to call us with any questions you may have.
1. Know Why You Want To Sell
A clear reason for selling can give your buyer confidence and affect how you manage the sale. Buyers will want to know why you are selling, so it is important to have an answer prepared. Some common reasons include:
- Retirement
- New opportunities
- Health or family needs
- Burnout
2. Get a Professional Business Valuation
You might have an idea of your business’s worth, but a professional could help you price it fairly. A business valuation takes various factors into account, such as:
- Revenue
- Profit
- Assets
- Liabilities
- Industry trends
- Market
3. Get Financials in Order
Having clear and accurate financial records ready can help you avoid unnecessary delays. It is a good idea to have the following documents organized:
- Cash flow reports
- Balance sheets
- Profit and loss statements
- Tax returns spanning two to three years
- Business debt schedule
4. Tie Up Loose Ends (Resolving Tax, Legal Issues, etc.)
If your business has outstanding issues, resolve them before listing for sale. This could involve addressing legal or tax matters, updating systems that do not work, or renewing leases.
5. Find a Buyer
There are many ways to find a serious buyer, including:
- Word of mouth
- A network of industry contacts
- Business brokers
- Online marketplaces
- Social media
6. Ensure Your Buyer Qualifies for Financing
No one wants to waste their time, so screening potential buyers to ensure they are eligible for financing can help. We could help you confirm your buyer has:
- Good credit and history
- Relevant industry experience
- The ability to provide a down payment
7. Structure the Deal
There is more than one way to sell your business. We could help you decide which is your best option. Some common deal structures include asset sale, stock sale, and seller financing.
If SBA loans are involved, the seller must exit the business after the sale. However, there may be a transitional period for the first few weeks.
8. Negotiate and Sign a Letter of Intent
A letter of intent is not a contract—it outlines the buyer’s intent and basic deal terms before addressing the details. A letter of intent outlines:
- Purchase price
- Payment structure
- Timeline
- Transition period
9. Due Diligence and SBA Loan Process
At this point, the buyer of your small business and their lender verify all necessary materials, such as:
- Financials
- Tax returns
- Lease agreements
- Licenses and permits
- Employee records
10. Close the Deal and Enjoy Your Profits
After the SBA loan is approved, it is time to close and celebrate. You will sign final documents, transfer assets, receive payment, and then be free to enjoy the rewards of your hard work.
Seek Expert Advice on Selling a Business After You Have Read These 10 Steps
Selling a business is a huge step. Thankfully, you do not have to do it alone.
Our team at BFG has helped many business owners sell and transition to new ownership. These 10 steps to selling your small business may offer clarity so you can confidently make big business moves such as this.
Call us for a free 15-minute consultation or visit our fast online application.