November 9, 2009
OPEN Forum Message
Test Your Business Skills
Take one or more of OPEN Forum's Crash Courses on topics like Leadership, Search Engine Marketing, Facebook and more.
Learn more
Quen Ton, owner of a manicure shop White Daisy Nail Spa in San Francisco, Calif., took advantage of lowered rent prices during the recession to start the business after working for years in others’ shops. Even so, she has found the process of growing her business very challenging, is operating at a loss and surviving on her husband’s income. If business does not pick up by the holidays, she will have to sell.
So as a small business owner, how can you know when it’s time to sell? Well, here are a few signs: being too far behind in expenses to catch up; facing competitors that are way too far ahead of you in the marketplace; insurmountable conflicts between you and a business partner or business partners; the inability to manage unexpected business growth.
If you are seeing critical signs that point to selling your small business as the only viable option, the following four tips can help you navigate a sale.
Don’t wait until the last minute to decide to sell. According to Harvey L. Gardner of BusinessKnowHow.com, you can’t wait until you’re desperate to sell your small business. Even though the downturn may have caused your company to go south faster than it would have in healthier economic times, staying level-headed is crucial. Deciding to sell a business is a difficult decision, and if you wait too long you may be pressured by bad health, financial dire straits or emotional stress. Prepare yourself for the time it takes to sell your business – anywhere from 120-180 days – and know that it will probably take even longer than this, especially during a recession.
Get a neutral party to assess your company’s value. When you decide to sell, make sure you get a realistic picture of your company’s worth from a neutral party. When you professionally valuate your company, you will have a solid foundation for fielding buyer offers and know what to expect from a sale. You will also be able to gauge your business’ market position, real financial situation as well as its strengths and weaknesses as perceived by potential buyers. You can ask for valuations from a variety of sources, including local accounting firms, regional business brokers and investment banking firms.
Get organized. According to Entrepreneur.com, potential buyers of your small business will need financial information from at least the past three years. Formal statements will make a better impression and make selling easier for the buyer, so make sure you get an accountant-reviewed/prepared statement instead of one that has been internally generated. Often tax returns are enough.
Keep working … hard. Entrepreneur.com also advises not to let your business fall into disrepair by turning too much of your attention on the sale of your company. A small business that is in total disarray because the owner is completely out to lunch when it comes to daily operations will be unappealing to buyers and give them leverage to lower their offers.
If you find yourself facing the sale of your beloved small business in the current economic climate, stay calm. By following an organized process and facing the facts about your company, you can navigate a successful sale and come out on top.
Check your balance, review recent transactions and pay your bill on the go.
