Selling a business isn’t like selling your car or home; there are no standardized steps, and surprises are always part of the transaction. Yet, when you speak with owners who’ve successfully sold their businesses, there’s a level of interconnectedness that highlights the types of sales that go through smoothly for both buyers and sellers that have nothing to do with random fortune.
Getting Your Financials In Order (Before Anyone Asks)
Typically, the starting point for discussion is financials. Not just getting them in order – but getting them in order to tell the story of your business.
Buyers ideally want three years of documents: tax returns, profit and loss statements, and balance sheets. But businesses that transition well sell a little more than just getting those documents together. They have an explanation ready as to why revenue dipped in 2022 and expenses increased last quarter.
Clean books are helpful, but this doesn’t mean your numbers have to be perfect. Every business has peaks and valleys over its lifetime. But if a buyer questions an expense line item and you can instantly respond without digging through boxes of receipts piled up in your office, that’s reassuring.
Some businesses even recast their numbers before they sell with the help of an accountant. This means adjustment for one-time expenses and personal expenses that won’t carry forward to the new owner. Your company car used for a weekend trip or your family’s health insurance policy get added back in to show true earnings potential. This isn’t necessarily fraudulent; it’s a way to show its value without including distortions to numbers.
The Operations Manual Nobody Thinks To Prepare
Here’s the difference between hassle-free sales and complicated ones: operating procedures.
When you’re in business for years, it’s second nature to know whom to call when inventory runs low or that the payment processor needs a reset on the first Monday of each month. You’ve developed relationships with customers that feel instinctive at this point.
But you have all this knowledge stored in your brain. And buyers get apprehensive when they can’t see how they can replicate what you’re doing.
The businesses that transition smoothly have these systems documented. Not necessarily manualized; sometimes it’s as simple as having notes on procedures, who you’ve reached out to for supplies or requests from customers, and those little quirks that help. One restaurateur had put together a simple binder of vendor relationships, notes on when to plan seasonal menus, and insight into staff scheduling needs. It took her about two weeks. It made selling the business infinitely easier because buyers could visualize running the business.
The Timing That Works For You
Many owners try to sell when they’re overly burnt out or overwhelmed by challenges and buyers recognize that level of desperation from miles away.
The sales that go through well occur when businesses are running decently; not their strongest but without the owner consistently putting out daily fires. Buyers want stability and no potential risks upon ownership.
Seasonality also plays a key role here. If you run a tax preparation service, it’s inadvisable to sell your business in February when you’re busiest – but late summer would give you potential time away from craziness to sell the company and focus on transitioning it.
And one thing most people don’t realize about timing is it takes longer than one thinks to sell a business – from start to finish, four-to-six months is common across the board. Sometimes longer based on larger operations. When you’re impatient and want things to happen by yesterday, you’re unsuccessful versus someone who can wait the extended time for everything to go smoothly.
The Right Buyers
Not everyone who shows interest is a solid fit. The sales that go through best involve buyers who understand the industry or possess relevant experience.
Someone who’s worked in manufacturing for twenty years looking to own their shop is different from someone with no experience looking to run the show because it seems fun. The former buyer will ask educated questions. The latter will become overwhelmed during due diligence when they realize how much they don’t know.
This is where understanding why use a business broker to sell a small business comes into play for many owners. Brokers have established networks of pre-qualified buyers and can filter out tire kickers before they waste anyone’s time. They know how to pitch the business to someone who will appreciate what you’ve built instead of someone just fishing for any interested buyer.
The matching process matters more than sellers typically give it credit for at first. The right buyer makes transitions easier; they’re more likely to follow through with the sale and keep what’s been successful about the venture intact.
Through Due Diligence Without Losing Your Cool
Due diligence is where most deals either stagnate or fall apart completely. A buyer is going to scrutinize everything, which is reasonable – financials, customer contracts, employee considerations, condition of equipment, lease terms – everything from licenses to permits.
The sales that progress through this phase quickly are those where sellers are easy to work with and organized. When a buyer’s attorney asks for employment contracts, they receive them within a few days – not two weeks later. When there are questions about how much was spent on one item, backup documentation is readily available.
This doesn’t mean jump through hoops every time someone asks – but being reliably consistent during due diligence keeps pace moving forward. Sales that take months tend to because information trickles in slowly and makes buyers apprehensive about what else might be disorganized.
Negotiation As Problem-Solving
No one enjoys negotiating with their adversary. Instead, successful sales involve two parties trying to work out what makes sense for both sides.
Price matters, but successful sales often rely on other flexibility factors: maybe the buyer only needs seller financing since their bank won’t cover every dollar or they need specific equipment that’s advantageous yet didn’t plan on being kept or they need you to stay on for longer than anticipated.
Owners who sell well generally know what they can bend on and what they can’t before entering negotiations. They have their reasons established going into negotiations. Must-haves vs nice-to-haves help delineate areas where compromise can be found once questions get more specific.
Sometimes creativity emerges from honest conversations where both sides reveal their weaknesses. One buyer wasn’t going to get to the ask price but could close faster, which worked best for the seller, who already had plans set in motion elsewhere within two months’ time of sale. They adjusted the price slightly and ramped up expectations at warp speed; both sides walked away happy.
The Commonality
When you review sales across the board that went well, there’s commonly one factor of similarity: preparation – financially but also mentally and physically.
These owners knew what their businesses were worth and why. They had their documentation in order and understood their plans’ motivations and timelines. They recognized realism would come into play and patience would be required if time slowed down for any reason.
While nothing is ever guaranteed with success – from too many variables outside anyone’s control – this stacks the odds overwhelmingly in your favor that when things go right, it’s rarely because of luck; instead, it’s because someone did all the work beforehand to make it happen.
