20 Insightful Secrets – How to Sell a Business Quickly
How to Sell a Business Quickly
Some business owners are asking how to sell to sell a business quickly. It is a justified question to ask with so many business owners taking forever to sell their business amongst all the firms for sale.
Whether its because you need to relocate, invest in another business or just want to retire. Here I will give you 20 insightful secrets, for how to sell a business quickly.
How to Sell a Business Quickly Key Line Items
1. Good up to date Financial Documentation
If you really want to know how to sell a business quickly you are going to have to start here with financials.
The Financial documentation you need are the following:
- Income Statement
- Balance Sheet
- Cashflow
- Management Budget
- Work in progress
- Account Receivable Aging Report
- Accounts Payable Aging Report
2. Good up to date Bureaucratic Documentation
Secondly for answering how to sell a business quickly you will need to prove that your business is a real business and registered with the government, along with showcasing any relevant compliance documents.
- Incorporation Documents
- Bylaws
- Share Certificates
- Previous 2 years Tax Returns
- Federal or State Licenses
- State Licenses
- Environmental Licenses
- Education and Training Certification
3. Good Executive Information
Describing how your executive and management team has the experience to do the job to buyers is a great way to get on the road to sell a business quickly. Providing the following would check off another relevant box for the buyer.
- Executive Board Structure
- Board Members Bios
- C level Bios
4. Good Management Team Information
- HR Hierarchy Structure
- Personnel Bios
5. Good Policy and Procedures
If you ask me how to sell a business quickly? I would start by saying policy and procedure is key to any working system that involves people. Therefore it is a critical element.
Some headings for a Policy and Procedure
- Policy
- Name of Procedure
- Applicable Parties
- Effective Date
- Supporting Documentation
- Procedures
- Approved by / Date
6. Marketing Strategy
Here are some headers for your Marketing Strategy. Also, these are just some of the headers you should have detailed answers to even if some of them don’t apply. It’s a great reference point for you to understand how to sell a business quickly and where buyers thoughts are, as well as what they want to see and hear from you.
- Who is your target audience?
- What is your Lead generation method?
- What is the demographics of your target audience?
- What is the geography of your target audience?
- What is your Product or Service narrative?
- What is the theme of your Product or Service?
- What is the Pricing methodology of your Product or Service?
- What are the Differentiators of your Product or Service?
- What are your communication channels?
- How do you encode your narrative?
- How do your clients or customers decode your narrative?
- Do you have marketing budgets prepared?
7. Sales Strategy
Similar to the above, if you want to know how to sell a business quickly, you have to speak in depth about your sales and your customer acquisition strategy. In some cases you have to speak about your retention strategy.
- How do you recruit salespeople?
- How many salespeople?
- What sales equipment or tech do you use?
- What sales material do you have?
- Do you have a sales budget? For:
Meals?
Entertainment?
Travel?
Events?
- Lead Funnelling
- Qualification
- of Calls/Emails
- Appointment Setting
- Presentations/Demos
- Follow-up Calls/Emails
- Tests
- Follow-up Calls/Emails
- Orders Taking
- Delivery / Fulfilment
Excellent activity for how to sell a business quickly.
8. Good Efficient Personnel
- This goes back to your methods of recruitment and what you look for in new hires or interviewees. A general approach should be taken, though specific to the vacancies, buyers want to see that, some thought is going into the recruitment process and it is not done “Willie Nillie”. Otherwise you will have a hard time understanding how to sell a business quickly.
9. Know the Fair Intrinsic Value of your Business
- Do an assessment of your Inventory, Equipment, Property, Plant, Furniture, Fixtures, Accounts Receivables and Cash then calculate exactly what your EBITDA is on a Monthly Recurring Revenue or Annual Recurring Revenue basis.
- Do a 3 projection of your business from a real perspective of whether your EBITDA and Assets levels are stable, increases or decreases.
- Work with an experienced accountant to provide you with an independent opinion on a fair EBITDA multiple for your industry and suggest the appropriate method of valuation you should be using for your business.
- At the end of this you should have a very good idea of your selling price or thresholds. This is a good way how to sell a business quickly.
10. Know the Future Value of your Business
- This future value of your business can be derivative of your projections mentioned previously and can be extrapolated further out that 3 years.
- It is very important though not to rely heavily on a projection that is beyond 3 years because many factors regarding risk emerges.
- Therefore, anything beyond a 3 year projection should have solid contracts to support the projections or be developed by an experienced accountant.
11. Know the Risks to achieve that Future Value
- Subsequent to the above, it is imperative that the rational or notes for the projections be clearly indicated within the projections or supporting appendages.
- This should be covered by your independent accountant.
12. Know what Price you are looking for
- Other than referring to the valuation you may have derived from your accountant, you may have a particular goal in mind for your specific situation, whether that is to have retirement money, invest in other things, buy a new home, take a vacation from work altogether.
- You need to now weigh your personal exit needs against your actual hypothetical valuation.
- The reason why I say hypothetical is because a buyer may have a completely different perspective on what the valuation should be.
- So its good to know how close or how far away you can be from your hypothetical valuation. This is a great way how to sell a business quickly.
13. Discount the Purchase Price Up Front
- Lets say the business valuation by the accountant is $10,000,000 and what you need personally to exit is $9,000,000. In this scenario, if you are serious about how to sell a business quickly, you can give the price a haircut to $9,500,000.
- This is assuming the buyer agrees with the valuation of $10,000,000. I can see any buyer getting much more excited about the transaction if that is the case.
- Concurrently you can introduce a reverse earn-out to get the balance of $500,000.
14. Commit to staying in the Business – 6 to 36 months
- I know that in some cases owners have no other choice but to sell and walk away, for personal reasons, but in lieu of those situations, buyers usually want some type of hedge to ensure all the customers/clients don’t leave or the business goes to crap.
- This gives a buyer enough time to inject him or herself into the business, recruit a new CEO, pass on client relationships to the new CEO etc.
- So just be open to a longer period than you would have thought for some buyers.
15. Accept part of Purchase Price as Deferred Payments
- Another deferred option you can offer is an equity rollover in the form of an option to the buyer.
- Seller financing is another option which is similar to a bank loan just that the value you will be repaying is the value of purchase price you haven’t paid in cash. This value can be structure with similar terms to a bank loan.
16. Accept part of Purchase Price as Performance Based Payments
- I mentioned this a bit above relative to reverse earn-out. All an earn-out is, is scheduled deferred payments specifically based on the performance of the existing owner.
- For the reverse earn-out, it is based on the performance of the post-acquisition owner.
17. Create an Organized Folder for all Data
- There are many free options available for cloud storage of your files. It is an extremely good option to create a very organized folder directory using either googledrive, onedrive, dropbox and various others to share access to your files remotely for ease and effective viewer management.
18. Dedicate yourself or colleague to these discussions with Buyers
- These conversations can be repetitive and time consuming for operators of a business. Also, the buyer wants to speak to either a decision maker regarding the business or someone extremely knowledgeable about the enterprise.
- So if you really want to know how to sell a business quickly, then this is important.
19. Avoid Business Brokers
- I have found that using brokers as a tool is a double sided sword. They can quickly facilitate putting together all of the items mentioned above, though what many don’t share with their clients is the incredibly long time it can take to sell a company. The question of how to sell a business quickly would definitely be out the door.
- Further to that 1 in 10 businesses for sale actually get sold, which is a 10% chance of getting your business sold. Again, how to sell your business quickly becomes an irrelevant question because, brokers will sell you on not leaving money on the table, by running auction processes to enable the sale, but in most cases buyers hate auction processes. At least the type of buyers it may be actually worth selling to.
- Ultimately how to sell a business quickly comes down to finding really good legal, accounting based M&A guidance. Relative to how to sell a business quickly, brokers I believe have a conflict of interest due to their form of compensation. Which are fees. These fees are tied directly to how much your business sells for, but if you have a valuation that is an inaccurate representation of reality and a buyer notices this early, but the broker doesn’t admit that to you, as the buyer, you are screwed.
- Unfortunately I have found that in 90% of the business brokers out there. The other 10% of brokers are A class that I have dealt with but we are talking selling a business quickly here, so be warned.
.
20. Approach Direct Buyers with a good Deal
- This is always the best option. Find out who is buying. This is how to sell a business quickly. Do some online searches for companies in the market for acquisitions of companies in your industry.
- There are many firms out there in acquisition mode looking for good unbrokered deals. These companies are really easy to spot online. You can easily build a database of buyers. At times, larger than a brokers’ database, because a lot of brokers rely on a small pool of buyers within their network anyway.
“Also….. Do you have an accounting cloud solution to help you get this done?”
In Closing
So do your homework and it will pay off. Though you must have a good deal, a bargain, a sale, promotion, call it what you will.
There must be an incentive to getting the buyer to move quickly, so they don’t miss out. And they will only think they are missing out if it is actually a deal.
There it is. Your answer to how to sell a business quickly. Also you can check out my post on how do I sell my company specifically.
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