Some business owners will eventually reach a point where it may be time to move on from their business. Whether that's a business owner's end goal when they first start, or they're looking to exit because priorities change, knowing how to sell your business will help you get the best business valuation for your sale.
This article will give you an outline that includes six steps to follow to prepare your business for sale, and eventually sell your business. We’ve tried to create a guide that can apply to as many businesses as possible. However, every business is unique. There are some considerations that we might not note in this article, so it’s important to take your time when it comes to each step to ensure you don’t miss anything.
When to Sell Your Business
There are numerous signs that point to the best time to sell your business. So, let’s break it down:
1. It stresses you out
Entrepreneurship can be exciting for many people. However, not everyone can handle the emotional rollercoaster that comes along with owning a business. If you find that you’re having more frustrating days than happy days, you may choose to sell your business to eliminate the stress.
2. The company outgrew you
Believe it or not, a company can grow beyond your skill set. If you find that your small company has grown into a massive enterprise, you may feel it’s grown beyond your control. In some cases, founders feel like they don’t recognize their own companies anymore. Some entrepreneurs are best suited for the startup stage, while others are better at managing large scale businesses. You may decide to sell your business if this happens to you.
3. A new opportunity arises
Sometimes a window of opportunity opens up that you just can’t pass up. Maybe you’ve been offered your dream job and want to consider going back into the corporate world. Or you’ve stumbled on a winning product on another business you’re working on. When that happens, you may decide that your business may be better run by someone who has more time to devote to your customers. In this case, you might sell your business to pursue this new and exciting opportunity.
4. Someone wants to buy your business
Selling a business is hard. But there are times when people build super cool brands that people are excited to own. If you’ve recently had someone offer to buy your company, you should consider selling your business as it’s a rare but wonderful opportunity. If the price is right, selling a business can be a profitable exit strategy so you can pursue other passions or business endeavours.
How to Sell Your Business: Six Steps for Selling A Business
1. Determine the value of your business
The first step to selling your business is to determine the value of your business. The business valuation is essential because it will determine your approach to the sale of your business. When you know how much you can sell your business for, it will help you decide whether to set an asking price or to field offers and take the best one.
If you have a desired sales figure in mind, you'll need to determine whether your business can sell for that amount, and if not, what you can do to help bolster the value of your business.
If you're simply unsure what your business is worth, knowing the value of your business can ensure you're not over-asking or under-asking, which can scare off cautious buyers. Understanding your business' worth shows confidence when you're going for the sale. The last thing you want to do is set a price too high and get no offers, or set a price too low and make buyers suspicious.
Finally, knowing the value of your business ensures you make the most money from your sale, that's possible. Nobody wants to sell their business and eventually realize they could have sold it for a much higher price.
To determine the value of your business, we recommend using our business valuation tool. This tool will give you a rough starting point. It’s important to remember that no tool can give you a 100% accurate appraisal of your business. Ultimately, what your business is worth is what people would be willing to pay for it. Our business valuation tool, or other tools such as WorthofWeb and SitePrice.org, are starting points. For more information on how they work (and what they’re missing), read our blog post.
From there, you can use different business valuation methods to come up with a number that’s closer to the actual worth of a business. Some use a 20x multiple of their monthly profit to come up with a number. Others look at the sale of other similar businesses to determine a fair sale price. Determine the best for your business and unique situation, and go from there. Don’t forget to factor in other things that increase the value of your business, such as the domain, backlinks, assets, supplier and influencer relations, and even money already invested in the business.
2. Organize your finances
When you sell your business, you'll want to have your finances in order. Complete transparency and honesty are crucial if you want your sale and transition of ownership to run smoothly and be uneventful.
If you can't easily report on sales or expenses for a period, it will be difficult to convince buyers your business is worth buying, and even more challenging to get the full value out of the sale of your business. That’s why it’s so important to have proper bookkeeping, documentation, and data early on in your business. Most people would much rather buy from an organized business owner than one with gaps in their data or finances.
If you have to, start doing some retroactive bookkeeping and try to figure out profit and growth since the start of your business, if you don’t have that data readily available. You’ll find when you’re selling your business and communicating with sellers that one of the most common questions will be around finances and profit.
Profit isn’t everything when it comes to the valuation and successful sale of a business, so don’t be shy about being transparent when it comes to ups and downs in profit. Other things can make your business appealing to buyers, like we mentioned earlier, so be honest and upfront here.
3. Prepare all your assets, products, logins, and documentation for transfer
The next step is to make an inventory of everything you will be selling, including in the sale of your business, and prepare it for transfer to the new owner. You’ll want to do this ahead of listing and selling the business for a few reasons.
The first is that when you make a complete inventory of everything you will be selling, you’ll have a better idea of the worth of the business. There’s many things to consider here. Here’s a list of some of the assets you’ll want to prepare for a transfer to the new owner, as well as include in the sale of the business;
- Customer/email lists
- Logins to software, software licenses
- Product inventory
- Supplier contact information
- Influencer and journalist contact information
- Tools, manufacturing equipment, raw materials
- Documentation (contracts, procedures, roadmap, marketing plans, etc.)
- Domains, websites, social media accounts
Preparing these things for transfer may mean creating a list of everything you will need to send to the new business owner, and writing some step by step instructions to get this transferred to the new owner. So, you’ll need to change passwords, send logins, or shipping details.
4. List your business for sale
Now that you’ve followed the above steps, it’s time to list your business for sale. There’s plenty of places to sell your business, but Exchange Marketplace makes it easy and secure to sell your Shopify business online. Exchange has partnered with Escrow to ensure that the payment, listing, and transfer process is straightforward and painless.
Even if you choose not to list your business on Exchange, the following process will likely be similar.
- The first step to listing your business for sale on the Exchange Marketplace is to install the Exchange Marketplace app on your Shopify store. It can be found directly on Exchange. This app will take traffic and sales data from your store to streamline the process of listing your business for sale on Exchange. It also helps verify the traffic and sales data on your store, making it easier for buyers to trust the listing.
- The next step is to create a listing on Exchange for your business. One of the more important sections you’ll want to add to your listing is the reason or reasons for selling your business. This insight will give buyers more comfort. Nobody wants to buy a business with defects or problems. However, if your business has those, you’ll also want to include that, and also include possible solutions for the buyer to implement.
- After submitting your listing, it will go through a review process. Once your review is approved, you can publish your listing. Your business is now for sale!
5. Field offers and communicate with potential buyers
From here, you will have to field offers and questions from various buyers. If you find yourself getting many of the same types of questions, you may want to revise your listing to include the answer to these questions.
Another essential part of this step is to be patient. It can take a long time to sell a business for the amount you’re seeking. If you’re lucky, you can sell within a few days, but most companies take longer to sell a business than that.
You’ll likely get many more people who are more curious than serious. In addition, even serious buyers may go back and forth with you for a long time as they do their due diligence. Of course, you’ll want to do your due diligence, too. Ensure the person you’re speaking to is sincerely interested and is trustworthy. Don’t be afraid to ask questions, such as if they purchased a business before and what interests them about your company.
You’ll want to sell your business to the right person. Selling to the wrong person may lead to more issues and headaches down the road after the sale. The person you sell to should be capable of running your business without your help. Of course, you’ll want to offer some support during the transition period, but ultimately, you don’t want to run someone else’s business part-time for free.
6. Close the sale
The last step you’ll take when you sell your business is closing the sale. Once you reach a point with a buyer where you’re both happy with the price and the terms of the sale, it’s time to close the sale. Within Exchange, you’ll need to accept the offer a buyer sends you. This accepted offer will create an Escrow transaction in your Exchange app, which will notify the buyer to accept the terms and submit payment to Escrow.
Once the buyer makes a payment, it’s your turn to send everything we listed earlier over to the new business owner.
How to Sell Your Business Summary
The journey from starting a business to selling a business can be an exciting one. You’ve learned so much about how to build something of your own using your own blood, sweat, and tears. The skills you develop from building your business can be used long after your business has been sold. So whether you’re moving towards a new business or embarking on a new path altogether, we wish you the best.
And don't forget to check out some of the sold stores for inspiration.
Why have you decided to sell your business? Let us know in the comments!