A major part of selling your business is getting the word out. After all, the more people that know your business is for sale, the better off you’ll be. In Bob House’s recent article, “How to Create an Effective Business for Sale Ad and Ensure It Gets the Best Result,” House gives readers an assortment of tips that he believes will help sellers attract higher offers from real buyers.
Getting the Word Out
As House wisely points out, many buyers wait until the last second to dive in and create a good sales ad. In fact, many buyers fail to grasp the real importance of creating a quality and compelling advertisement. Imagine creating a good sales ad like you would going fishing with a group of friends. The more friends you have on your fishing trip, the greater the odds that someone catches a fish. In much the same way, the more people who know you are selling your business, the greater the chances that you’ll get some serious “bites.”
Tips for Receiving More Attention
House has five key tips for attracting more attention from prospective buyers via your sales ad. At the top of the list is to be descriptive. Your sales ad should give an excellent description of your business and its unique features. As House notes, you want to “paint a clear picture.” In other words, now is not the time for mystery. You want prospective buyers to have a very clear idea of what kind of business they could possibly buy.
Secondly, you should have a great headline. People have always skimmed, but the rise of the Internet has taken skimming to a whole new level. Your sales ad should have a very engaging and interesting headline. You want to capture people’s attention. A good place to start is by determining what your business’s best feature is and emphasizing that feature in your headline.
Incorporate Top-Notch Images
Third, the old saying that a picture is worth a thousand words absolutely applies to selling a business. Just as a great headline will capture people’s attention, the same holds true for a great picture. Consider having a professional photographer take the photo, as he or she may have tips to make your business look its best that you may simply not know.
Fourth, your ad should definitely include key financials. Any serious buyer will be very concerned, if not obsessed, with your financials. Information such as cash flow and income statements are a good idea as may potential buyers focus their business searches around key financial metrics.
Don’t Forget the Final Step
Finally, if there has ever been a time in your life to proofread, this is the time. In fact, you should consider hiring a proofreader to look over your ad for grammar and spelling mistakes. As House notes, you want prospective buyers to realize that you are attention oriented and responsible. A simple grammar or spelling mistake could wreck a potential deal.
Creating a great sales ad is an art form. One of the best ways to ensure that you have a great sales ad is to work with an experienced business broker. Business brokers know what buyers are looking for, have great marketing professionals at their disposal, and can help you frame your business in the best light possible.
In his recent article in Smart Business entitled, “How to get your business, and yourself, ready for sale,” author Adam Burroughs explores the key points of getting your business ready to sell. Burroughs points to the truism that, at some point, almost every business owner must sell his or her business. For this reason, it is critical to think about what it takes to get your business ready to sell. Simply stated, it is best to explore and plan for selling your business long before you actually need to place your business on the market. Let’s explore some key points for selling your business.
Broadening Your Options
Burroughs interviews Scott McRill at Clark Schaefer Hackett. McRill notes, “The sooner you think about your exit, the more options you’ll have for yourself and the business when the time comes.” A savvy business owner will always want to give himself or herself as many options as possible. McRill wisely points out that early planning is key, and a failure to engage in early planning could lead to a lower selling price. If you want to get the best price for your business, then planning for the eventual sale as far in advance as possible is a good move.
Planning in Advance
According to Burroughs, business owners should start planning to sell their business at least 2 to 3 years before they actually plan to sell. Part of the reason for this is so that business owners will have enough time to make operational improvements designed to maximize the business’s overall value.
A Financial Review
At the top of every business owners “preparing to sell” list is to have a third-party review the business’s financial situation. This is excellent advice for, as frequent readers of this blog know, any serious prospective buyer will look long and hard at your business’s financials. Getting your business’s financial house in order means that you should turn to an accounting firm for help. You’ll want to review financial statements for at least the previous 2 to 3 years.
Burroughs points out that when it comes to selling a business, there are many variables that business owners often overlook. At the top of the list is the management team.
Your Management Team
Prospective buyers can get very nervous about the stability of the management team once ownership has changed hands. Often, the new buyer may only sign on the dotted line if the owner agrees to stay on after the sale during a transition period. Having a competent and proven team in place, one that is dedicated to staying with the company will help you get your business ready to sell.
There are a lot of variables involved in preparing to sell a business. The sooner that you get experts involved in the process, the better off you will be. A business broker can serve as a guide – one that can point you in the right direction. Find a broker with an abundance of experience, and you’ll have an invaluable ally who can help you navigate the process. It can take a lot of time and effort to sell a business. Working with a business broker can keep you from reinventing the wheel at every step of the process.
Effective tax planning is the number one way you can increase the amount of money you net when you sell your business. Author Tim Fries at The Tokenist has written an excellent article on what tax issues business owners need to consider before they sell their business. His article, “What Tax Structure Should You Use When Selling Your Business?” explores many aspects of a topic that most business owners fail to investigate before they decide to sell.
As Fries astutely points out, the taxes you are responsible for paying when you sell your business can be complex and are usually a big unknown for business owners who have never sold a business before. Your tax structure can have a big impact on how much money you receive at the closing of your deal, so it’s important to get good advice from a tax advisor early on. A little bit of tax planning ahead of time can save you a lot of money in the long run.
Fries points out that taxes and selling a business are no small matter. It is possible that up to 50% of the proceeds you receive from the sale of your business can go to pay taxes. Don’t worry if you are learning this for the first time and feel more than a little shocked. However, this fact does a good job of illuminating the importance of setting up the right tax structure for your business. While you probably won’t be able to avoid paying altogether, you can prevent paying more taxes than are necessary.
There are a lot of variables that go into how much you will owe in taxes. Let’s take a look at some of the factors that impact your tax liability.
- Will the sale be structured so you receive ordinary income tax treatment or will the sale receive capital gains treatment?
- Is your business an LLC, a sole proprietorship, a partnership or are you operating as a corporation?
- What portion of the sale price is being allocated to tangible assets versus intangible assets like goodwill?
- What is your tax basis in your business?
- How much depreciation have you taken and how much of it was done on an accelerated basis?
- How will the purchase price likely be paid? In installments over time, or in cash at closing?
- Will the deal be structured as a stock purchase or an asset purchase?
- Do you know that your transaction costs are likely to be? These will be added to your tax basis and reduce the overall capital gains taxes you will need to pay.
Selling a business is obviously complicated. Working with an experienced business broker can help you navigate the complexities of selling your business and getting top dollar for that business when you decide to sell, but getting advice from a tax advisor will help you ensure you keep as much of the proceeds of the sale when you ultimately decide to sell.
There is no doubt about it, it can be exciting to buy a new business. However, in the process, it is very important that you don’t become unrealistic about future growth. Keep in mind that in the vast majority of cases, if a business is poised to quickly grow substantially, the seller would be far less interested in selling.
Richard Parker’s recent article for Forbes entitled “Don’t Be Delusional About Growth When Buying a Business” seeks to instill a smart degree of caution into prospective buyers. Parker notes that when evaluating a business and talking to the owner, many buyers come away with a sense that enormous growth is just “sitting there” waiting to be seized. In particular, Parker cautions those buyers who are buying into an industry that they know nothing about; those individuals should be very careful.
When buying into an industry where one has no familiarity, there can be a range of problems. The opportunities that you see may not have been tapped into by the existing owner for a range of reasons. You couldn’t possibly guess what these reasons might be without more of a knowledge base. Since you are an outsider, you likely lack the proper perspective and understanding. In turn, this means you may see growth opportunities that may not exist, as the seller may have already tried and failed. Summed up another way, until you actually own the business and are running it on a day to day basis, you simply can’t make a proper assessment of how best to grow that business.
The seductive lure of growth shouldn’t be the determining factor when you are looking for a business. A far more important and ultimately reliable factor is stability. The real question, the foundation of whether or not a business is a good purchase option, is whether or not the business will maintain its revenue and profit levels once you’ve signed on the dotted line and taken over. You want to be sure that the business doesn’t have to grow to remain viable.
As Parker points out, the majority of small business buyers will buy in a sector where they don’t have much experience, and that is fine. What is not fine is assuming that you can greatly grow the business. Of course, if new buyers can achieve that goal, that is great and certainly icing on the cake. But don’t depend on that growth.
In the end, everyone has some ideas that work and some that don’t. You may take over a business and, thanks to having a different perspective than the previous owner, are able to find ways to make that business grow. But realize that many of your ideas for growing the business may fail completely.
A professional business broker will be able to help you determine what business is best for you. A business broker will help keep you focused on what matters most and steer you clear of the mistakes that buyers frequently make when buying a business.