Selling Your Business? Do These 6 Things Right Now.
Opinions expressed by Entrepreneur contributors are their own.
According to data from the Small Business Administration, more than half of the small business owners in the U.S.?are over?the age of 50. Because of this, many of us are starting to think about the future and possibly one day?selling our businesses. This is why research site?BizBuySell reported?that the business-for-sale marketplace grew almost 5% last year, a gain of 19% since 2020 and the first half of 2023 has already “experienced strong year-over-year gains.”
There are many reasons I’m expecting to see continued growth in the number of?small business owners?looking to exit their companies over the next few years. Our population is aging and much of the “boomer” generation is at retirement age. Capital gains and estate tax rates — for now, at least — remain at historic lows.?Stock market volatility?is driving some people to seek more stable, controllable returns for their money. And a growing number of millennials have now gained enough business experience to want to venture out on their own, and buying an existing business rather than starting from scratch is an attractive option.
If some or all of these factors are making you think it could be time to sell your business, then know that this won’t occur overnight. You will need to plan and take these six actions before dipping your toes into the market.
Re-visit your buy-sell agreement
If you have other equity partners, I’m hoping you have some type of partnership or?buy-sell agreement?which indicates the process that will need to be followed if one or more partners exit a business — be it voluntary or not. This agreement addresses issues like valuation, insurance, taxes, transfer of shares and death or sickness of a partner. If you and your partner(s) have agreed to sell your business sometime in the future, then it’s critical to update this agreement so that everyone’s on the same page as to how the transaction will go. No buyer wants to walk into a messy divorce.
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Pay for a valuation now
Humans always think that we’re more important than we really are. And business owners always think that our businesses are worth more than they really are. Before entering into the buy/sell market, it’s important to get a reality check. To do this, I recommend hiring an independent appraiser (ask your accountant or attorney or search online) and letting a professional without an agenda tell you just how much your company may be worth. Your appraiser should have a CBA (Certified Business Appraiser) or ASA (Accredited Senior Appraiser) qualification. Getting an appraisal done earlier will be a reality check and allow you to zero in on the areas of your business that need to be fixed in order to increase your company’s value. That way you can go into the market with a price for which you have confidence.
(Read the full column in?Entrepreneur)