You're thinking of selling your business and are eager to cash in and be rewarded for all of your hard work you've put in over the years.Often times it is beneficial to build recurring revenue streams into your business model, to increase your business value, in order to net enough from the sale to fund your future plans.Recurring revenue is a key strategy and value driver to any business.
Recurring revenue is a guaranteed revenue for some period of time that does not require the same level of sales and owner effort as one-time revenue. It typically results in much higher profit margins which is always highly coveted by buyers.
Examples of recurring revenue include:
There are several types of business assets you need to consider when you determine your company’s valuation before a sale. Assets are grouped by usage, convertibility or physical existence, although some accountants may use other classifications.
It can make the difference between getting your desired price or settling for less. Don’t sell your business without careful planning and consideration. A bad day, week or even a bad fiscal year shouldn’t make you part with the company you spent so long building. Consider long-term problems before putting your business on the market, such as industry changes and market conditions.
A qualified business broker is a professional intermediary who helps small business owners sell their companies. The broker provides a buffer between buyer and seller, using his or her expertise to help owners obtain the best price for their business. A broker protects your interests, files paperwork, and acts as a liaison between insurance agents, bankers and other professionals involved in the sale. Here are some other reasons you can benefit from hiring a business broker.
1) Poor Preparation
Prepare your business for sale to prevent unpleasant surprises. Business brokers recommend owners spend at least two years getting their finances and overall business practices in order. Improve your company’s accounting procedures, staffing issues and the physical state of your office or facilities. This will impact your business valuation, the type of buyers you attract, and what they are willing to pay.
2) Trying to Go It Alone
Selling your business without help from a broker may result in a poor sale price, delayed sale or no sale. Scattering your energy by handling the sale alone and trying to run your business at the same time can burn you out and result in poor decisions.A business broker’s fee may eat into the amount you receive after closing, but it’s a small price to pay for ensuring a fast and lucrative sale.
3) Not Pre-qualifying Buyers
Pre-qualifying prospects prevents sensitive financial i ...
Business owners who want to sell their companies for a hefty profit need to review their accounting methods. Fine-tuning both daily bookkeeping and monthly financial reports contribute to an increased valuation for your business and an easier sale. Good accounting methods prevent the errors and omissions that may drive buyers away (and invite scrutiny from the IRS). Improved accounting shows you where you can reduce expenses and where you need to enhance sales. After you’ve assessed your accounting system, you’ll get a clear picture of your current business worth and how you can increase profits.
Put yourself in a prospective buyer’s shoes. What would they find desirable in a business? A steady revenue stream, a stellar reputation, a loyal customer base? Before finalizing your sales plan, consider what your ideal buyer wants from a business and make sure you deliver it to close the sale faster.
One or more trusted employees can buy the business from you and continue to run the company. This saves you time because you won’t need to break in a new owner completely unfamiliar with your service or product. The continuity of your business process and reputation is protected, and you won’t spend time sifting through iffy prospects.
Finding a good employee with enough cash to buy you out may be a challenge. You might need to finance a portion of the sale and risk not being paid back if the business does poorly. If you do have an employee who can put down 25% of the total price, he could be eligible for a Small Business Administration (SBA) loan, and let you leave the business without any financial worries.
Instead of selling to one employee ...
First, you must understand why you are selling your business. In order to create a sound infrastructure for a fruitful exit, you will have to identify the elements that have led you to contemplate selling. Be honest and forthright about what's motivating you to sell.
If you have an immediate need for an exit, this can equate to a lower sale price. In addition, by moving too quickly you eliminate the opportunity to strengthen the attractiveness of your offering prior to sale.
In contrast, if you are more strategic and plan your exit at a slower pace, take the necessary time to properly prepare your business for sale, maintain flexibility with a willingness to finance a portion of the sale, the outcome is more likely to yield a qualified buyer who is willing to pay a higher price.
Sellers' motivations have a direct impact on their desired terms for the deal and their expectations for the sale. Prospective bu ...