We received so many comments after one of our latest podcast episodes with Kirk Michie from Candor Advisors about successful business exits. In particular, you guys wanted to know what are some key questions to ask when selling a business. As always, your wish is our command! Today, we’re going diving deeper into this vital process and helping you prepare your company for a successful sale.
The Importance of Preparation in Every Business Exit
As you know, recently, on our podcast, Kirk Michie shed some light on the most critical moment in every seasoned entrepreneur’s business, and that is selling a business. It was such an insightful episode that it sparked many conversations in our inbox with our lovely listeners and readers.
It gave us a better understanding of how important it is to get ready for a business exit before you jump into it unprepared and unaware. As it typically goes in business, preparation is half the job done. And preparing for a business sale is certainly not an exception.
5 Questions to Ask When Selling a Business
Whether you’re still in the process of building a steady business or you already have a business exit on the horizon, there are surely a lot of questions on your mind right now. And it’s no wonder since selling a business is just as overwhelming as buying or building a business from scratch. This is a very important milestone in both your professional and personal life, so nothing should be taken lightly. Here are some key questions to ask when selling a business to ensure everything goes smoothly for you.
What is my motivation for selling my business?
One of the most vital questions to ask when selling a business is, ‘What is my motivation for selling?’ Understanding your ‘why’ will be beneficial both for your own sake and your future buyer’s sake. Take the time to ask yourself, ‘Why do I want to sell right now?’ and try to be honest with yourself.
Is it only because you are experiencing burnout? Or there’s a deeper meaning behind your desire to exit? Understanding your true motivation will put you in the right mindset (in case you do decide to move forward with the sale), help you put things in motion, and ultimately have a smooth and successful transition.
How do I prepare to sell my business?
Here’s another critical question to have in mind when you’re thinking of selling your business. Is there any debt you have to pay off? What financial documents will you need to collect that potential buyers will require? Should you start preparing an exit strategy already? These are all vital topics of discussion for you and your team as you prepare for sale.
How much is my business worth?
Determining your business value is another necessary step for a successful sale. When you understand the true value of your company, you will have a much better chance of asking for and getting a fair price. In general, your business worth is what someone is willing to pay for it, but knowing the estimate before you move forward will certainly help prepare you for what’s coming. It will set the right expectations regarding what to expect from the market and future buyers and ensure you’re aligned with the business valuation as the owner.
What documents do I need to show to potential buyers?
When considering making a business sale, you need to ask yourself what documentation and information you need to compile for the potential buyers. Your financial papers (such as EBITDA, ARR, retention, and headcount) tell your business story and give a better insight to potential buyers into how it’s doing. That helps them determine whether they’d like to proceed with the purchase. Ensure the buyer is serious about your business before giving away any key documents or company secrets.
What are my plans for the future?
Another vital thing to think about as you’re preparing for a business sale is your future plans. What do you want to do next in your career? This essentially goes back to the first question in the article regarding your motivation behind wanting to exit the business. Ultimately, understanding your ‘why’ is going to help you determine what the next chapter holds for you and how the sale fits into that picture.
Get Your Business Ready for Sale
As you can see, selling a business is not something you should take lightly. It’s a long and complex process that begins with some critical questions first. It’s bigger than just a financial decision; it’s a life-changing move that can shape your entire future. So, understanding your main motivation for selling, carefully planning it out, and knowing your business’ value are fundamental for success. By answering the above-listed questions thoughtfully, you’ll be one step closer to a new, exciting chapter of your professional life and your company’s promising future.
