Tips for Making Your Small Business Sellable

By Mike Iwasiow Date 16/04/2014  

Sales of small businesses grew by nearly 49 percent in 2013, according to a report released in January by business-for-sale marketplace BizBuySell. The improved economy has resulted in more buyers being financially able to purchase existing businesses, while owners who may have delayed selling their business during the recession are now more interested in putting them up for sale, reports FOXBusiness.com.

There are many reasons to sell your small business, even if it’s profitable and doing well; in fact, especially if it’s doing well. Perhaps you’re ready to move on to another venture, maybe you want to spend more time with your family, travel the world, or perhaps enjoy financial freedom during your retirement years. Whatever your reason for selling, it’s essential to do some footwork to prepare your business so that it’s desirable to potential buyers.

BizBuySell GM Curtis Kroeker says that although median sales prices of small businesses rose by 13 percent in 2013, it’s still a buyer’s market, which means it’s still important to be proactive in order to maximize the value of your organization.

Branding

A strong brand is one of the most important tools for creating a strong, saleable business. A recognizable brand in itself offers value because the brand becomes more important than who the owner of the business is. Without a strong brand, the owner is often the only person that can make the operation a success. While it can take years to develop and establish a brand that dominates your particular target market, if successful, it is bound to pay off big when it comes time to sell.

Strong, consistent performance

Timing is everything. When you put your company up for sale, it should be performing at its best, such as just after the busy season begins. Also keep in mind that buyers are looking for consistent profitability in the years leading up to the sale, so you’ll want to assess all aspects of the operation to ensure each piece is optimal, including cash flow, expenses, and tax strategies.

Avoiding scams

A small business is at risk for a number of different scams, which is the last thing you want to have happen when preparing to sell. Not only can a scam cause financial damage, it can also hurt the business’ reputation.

Chief of the FDIC’s Cyber-Fraud and Financial Crimes Section, Michael Bernardo, says that the most common small business scam is a bank account takeover, according to InCorp. Criminals can use fake emails and websites for delivering malicious software. This software can obtain IDs and passwords for online bank accounts, allowing them to make withdrawals. Signing up for ID theft protection service from a company such as Lifelock.com can provide fraud protection that can help prevent such a disaster.

Make sure your books are in order

Buyers want to know that there are few risks involved in buying your company. One of the most important things you can do to convince them of that, is to make sure that all of your accounting records, asset inventories, and financial statements are in order.

Bad record keeping can cause the buyer to hesitate due to mistrust, jeopardizing a potential sale. On the other hand, well-kept records can positively influence what the company is worth and even increase its asking price.