Preparing to Sell Your Business: Part 1

By Nicole Leinbach Reyhle

This two-part series explains how to prepare small- to mid-size businesses for succession, whether in the near-term, several years down the road, or many years in the future. The more preparation, the better, so it’s best to start planning as early as possible.

Is Your Business Profitable?
To start the planning process, you’ll need to realistically evaluate your business status. Is your business profitable? Even if the answer is currently “no,” it may still have enough value to justify passing it on or selling it. There are also strategies for passing it on to family members or existing employees that may not be as financially rewarding but might be the right move.

Is Your Business Positioned to Sell?
According to a recent report from BizBuySell.com, which tracks and analyzes business-for-sale transactions, 8,647 small businesses were reported sold in 2021, compared to 7,612 in 2020 (bizbuysell.com/insight-report).

“Businesses that sold in 2021 continued to be those with strong financials,” BizBuySell.com said. “Compared to the previous year, the median cash flow of sold businesses grew 10% to $149,099 with median revenue up 2% to $625,943.”

Expanding on this, BizBuySell.com explained that “as the pandemic lingered, buyers gravitated to businesses with reliable sales. Savvy entrepreneurs also sought out discounted businesses that offered prime real estate and other valuable assets despite poor performance.”

Small- to mid-size business owners should consider the following questions to help determine the marketability of their business:
• What is your revenue and profit?
• Has your business experienced consistent financial growth in the last few years?
• Will you continue to create revenue in the years ahead? Why or why not?
• Are your profits currently decreasing, or are you facing decreased profits in the near future? If so, what are the causes and how do you plan to overcome them?
• Have you identified any nonnegotiable barriers to selling your business, such as the buyer wanting to lay off current employees or move the business out of the area?

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Click Here to Read Succession Planning: Preparing to Sell Your Business, Part 2