Top Three Tips to Sell Your Business for Top Dollar
GET YOUR FINANCIALS IN ORDER.
If you don't have professionally organized financials, get them. Get all of your income and expenses itemized and categorized in Quickbooks. This gives the potential buyer a clear understanding of how the business makes a profit.
GET TO $250,000 IN ANNUAL PROFIT.
Generally, if your business has been around for at least two years and it's making at least $250,000 in annual profit, you may be a good candidate to sell.
REDUCE THE BUYER'S RISK.
Businesses typically sell for a multiple of trailing 12-month profit (income MINUS expenses = profit). This means that if your business earned a profit of $250,000 in the last 12 months, and you sell it for a multiple of 4, the sales price would be $1mm. The less risk to the buyer, the higher the multiple you're likely to get. This means you should ask and answer these two questions:
- What's the risk that the profits will go down after the sale, and how can I reduce that risk?
- What's the risk that the business won't grow at the same level that it's been growing, and how can I reduce that risk?
When things are going great and you don't need to sell!
Source: Entrepreneurs on Fire