Five Things Entrepreneurs Should Know Before Selling a Company

Selling a business can land you in a lot of money and give you a fabulous retirement, if you are looking forward to retiring. However, it is not as easy as it seems. The sale of many businesses has ended up in failure because of certain mistakes or assumptions made by business owners. Should you need to sell a business, no matter the type of business, there are some tips that can be very helpful. Here are five things entrepreneurs should know before selling a company:

Profits, Not Revenue

Buyers are looking to buy businesses that would make them more money. As it is popularly said in the business world “if it is not making money, it may not be making sense.” Putting money to buy a business is an investment and investments must give returns. No matter how much money the business brings in, if it is not making actual profit, a buyer would merely walk away. A business may be making $10 million in revenue annually but its profit may fall in around $1 million annually. This may be because the working expenses and taxes for the business may sum to almost $9 million. However, another business with $6 million annual revenue may rake in about $3 million in annual profits. An investor would definitely want to buy the latter business.

Brokers can be useful

If you feel you are not a seller or you don’t feel confident in selling the business yourself and you need professional help, brokers can be very useful. Brokers are basically independent agents who work for commission. The goof thing is that you don’t get to pay the broker from your own money. Once the broker has expressed confidence in selling the business, his commission comes from a percentage of the money from the sales. Business brokers with high levels of professionalism and experience can keep sellers and buyers moving forward with a deal, even when all seems to be lost.

Potentials don’t really pull more money

It is good if your business has potentials to make more money but buyers are looking at businesses already making money. To be straight, no entrepreneur wants to do the little more hard work needed to hit gold in the business; they just want it to expand their revenue sources. Thus, if your business is yet to hit gold, you should probably still stick to it.

Live in the reality of your business

If your business was making a lot of money back in the days and no longer making as much as it used to, you may not be able to sell it for its former value. Buyers don’t want to buy a business with tales of past glory days, they want businesses with present glory days and potentials for much more. Thus, live in the reality in the assessment of your business.

Be prepared to walk away from deals

There are deals that would not portray the true value of your business. Don’t be too desperate to sell, walk away if needs be. You may be surprised that the potential buyer who undervalued was looking for a way to test what you really think of the worth of your company and your resilience.