While some business owners value the independence and freedom of owning their own small business, there are others who develop small businesses in order to sell them to larger companies for a profit. Selling a small business is a good strategy for building a successful enterprise, but the process requires preparedness and a little research.
Figure Out What your Company is Worth
Establishing the value of a small business is a challenge many first-time sellers face. But just like when selling a house or car, you have to determine the worth of your company in dollars. Your small business may mean a lot to you—after all, you've been there every step of the way since its conception—but it's very important to keep emotions separate from the transactional process. Be realistic with your value assessment. An inflated price tag will make prospective buyers wary.
There are several different methods to determine the value of your company. An asset-based valuation calculates the worth of your business based on tangible and intangible assets. However, this method overlooks the company's earning potential and therefore skews the actual value of the business. It's best to use this process when determining the value of a failing business.
The earnings multiplier method is usually the best way to assess a healthy, thriving business. This process helps forecast what future earnings may look like, and makes it easier for investors to see how their purchase will pay off later on.
Research your Prospects
If you're pitching to a specific company, be sure to do your homework on the prospect and determine the ways your goods or services can help them succeed. This will help fill in your presentation with matters the bigger company can relate to, and will help you stand apart from the competition. An Entrepreneur article recommends preparing a 30 to 60-second elevator pitch that not only explains what you do, but why you're better than your prospect's current situation.
Get Organized and Be Prepared
Big-company buyers will most definitely look into your credit history, so be sure to have finances in order before your presentation. It not only makes it easier for your prospects to get an accurate forecast of your company's future, but also creates a good first impression. Always have professional business cards on hand, and consider splurging on a company email address that matches your business name—both simple steps that make it so much easier for buyers to remember you.
According to Success.com, you should be prepared to follow up with a corporate-level decision maker at least 8 to 10 times. If you're trying to get in touch with a C-level executive, it may take 10 to 14 tries. While a little persistence will give the impression you're serious about selling a small business, pestering will make you seem inconsiderate of your potential buyers' busy schedules. Entrepreneur recommends leaving the interview by asking what next steps you can take to follow up.
Selling a small business can seem intimidating, but being organized and prepared will reduce stress and allow you to focus on explaining how your business works, and how your products and services would be beneficial to a corporate giant. So before your presentation, relax and take deep breaths—you're one step closer to selling a small business!