Selling a business is not always brokered deals, stock options, and royalty fees paid in perpetuity. Selling a small business is much simpler. There are no stockholders to deal with and frequently there is only one employee, the solopreneur.
Why Sell Your Business?
After years of putting your blood, sweat, and tears into a small business, many friends and family may question why you want to sell. The answer varies greatly from person to person. Sometimes an owner is selling a small business in order to re-career into a 9-to-5 job. While most people go the other direction, there is a certain appeal to having a guaranteed weekly paycheck. Other solopreneurs may be ready to move on to the next big thing. One thing is certain: when you have spent years of your life building a business, you have not only a personal attachment to its continued success, but you also need to get as much monetary value out of it as you can. Luckily, there are several ways a solopreneur can do just that.
What Do You Do With Outstanding Invoices?
If you have outstanding invoices with existing clients, you can wait until they are all paid, or you can sell them. It depends on when they are due. Many commercial invoices require small businesses to wait 30, 60, or even 90 days for payment. Fortunately, there are companies that offer factoring services to deal with this exact problem. Basically, they buy the invoices from you at a discount and wait for the customer to pay them the full price. While not ideal, you get your cash upfront so you can move on quickly.
You could also include the invoices in the sale of the business, adding more value to the sale.
How Do You Determine the Value of The Business?
If you have ever watched an episode of Shark Tank, you know that many people pull numbers out of the sky when valuing their business. The fact of the matter is that there is an actual mathematical formula to determining the value of a small business. Most experts suggest that, while valuation methods vary, a good rule of thumb is 0.6 percent of gross sales. It is important to note that, regardless of the sales price you decide, most small businesses are selling for 93 percent of the list price in 2018.
You will also want to take any physical property into consideration in the sale as well as any debt, as both can affect the final pricing strategy.
What If There Is Nothing to Sell?
Many small business owners assume that because the business is just them at their kitchen table, there is nothing to sell and no money to be made. They would, however, be very wrong.
It is true that there is often nothing physical to sell like there would be in a store when you own a service business, for example. Someone new to the industry, however, may be interested in buying the name of your business. Essentially, they are buying your reputation, which has enormous value. Plus, you can even offer to personally show them the ropes for a few weeks or months.
If you keep good records and have customers that return monthly or annually, you may be able to drive the price up by including contact information in the sale. Be sure to offer to introduce the new owner to your past clients, either by mail or in person.
Talk to a professional to learn more about selling a business. You wouldn't buy a house without a real estate agent. Don't sell your business without an experience broker.