Just like buying or selling a house, buying or selling a business is a significant process. It can be one of the largest and most important transactions that an entrepreneur will undertake that requires careful preparation to be successful.
Here are 5 key steps that buyers and sellers both need to complete as part of the transition process.
It is never too early to plan for the sale of your business. Ensure books and records are up to date, supplier lists are accurate, and necessary improvements and updates are completed throughout the life of your business. Outdated technology and last-minute cosmetic changes can deter potential buyers. For buyers, this means researching business opportunities that align with your passion and experience. Connect with lawyers, accountants, and other advisors to understand the purchasing process and the information you will need to evaluate a business opportunity. Ensure you understand your financing options well in advance.
It can take anywhere from 5 to 12 months, or longer, to complete the transaction. Don’t rush the process. Taking the time in advance and during the sale or purchase process will benefit both parties and help to ensure the long-term success of the business.
Understand the Value of the Business
The biggest driver of business value is profitability. Historical and current financial records tell the story of business growth and profitability and, when prepared correctly, substantiate business value. It is very common for owners to have a different opinion of the value of their business than those of potential buyers. A business valuation is an important step in obtaining an objective, independent assessment of the business value and establishing a purchase price. Valuations can be completed by accountants or certified business valuators and can range in complexity, level of detail and cost. Buyers and sellers should complete their own independent valuation of the business.
Focus on the Relationship
When the buyer and seller work closely together throughout the purchase process, it is more likely there will be fewer problems during the transition. A strong relationship ensures a better flow of information and communication of expectations. The new business owner will also benefit from a period of mentoring and/or training post-transition. This is an important and challenging time for the business, and ongoing support from the previous owner helps set up the business for continued success and ensure the business’s legacy.
Surround Yourself with Support
There is a wealth of resources available to both buyers and sellers, so don’t feel like you are on your own. Consult with experts, advisors and local business support organizations. These resources are available to you throughout the process and beyond!
About BizLink: BizLink is a program that seeks to match business owners looking to transition their business to new ownership. BizLink provides access to tools, resources, and a network to assist individuals throughout their succession plan, business purchase and ownership transition. Community Futures South Georgian Bay provides complimentary advice and coaching through all stages of the transition process, including financial support for new owners. Don’t wait, start your business transition process now by contacting Community Futures South Georgian Bay!