3 Things to Do Before Selling Your Business

October 25, 2019 - 5 minutes read

The 3 Things to Do Before Selling Your Business

Have you begun to think about “life after your business”? Are you imagining a sunny retirement somewhere without a care in the world? Spending your time golfing, traveling, and doting on grand kids? Taking the steps to sell your business and secure the future that you want both require careful thinking and planning.

Have you begun to think about that big next step? If so, there are three things you need to do before selling your business:

1. Know its Value Before Selling Your Business

A business valuation provides an estimate before selling your business

Start with an estimate of what someone may pay you to buy your business.

Begin by determining a rough estimate of the value of your business. Ultimately, of course, your business is worth exactly what someone else will pay for it. But, you should at least identify a starting point. Work with your CPA, or, if possible, speak with a business broker who has experience selling your type of business. Your CPA and/or an experienced business broker can help you create a reasonable expectation of your selling price.

2. Be Ready to Answer a Lot of Questions

Prospective Buyers will be asking you a lot of questions. They’ll want to understand your business’s history, its current situation, obstacles and opportunities. Be ready to answer the question, “Why are you selling?” They’ll want to understand the customer base, trends, margins, etc. They’ll want to know who came up with the business valuation, and what data was used. In short, they are going to ask lots and lots of questions.

Questions are a common part of selling your business

Prospective Buyers will be asking plenty of questions.

Prospective Buyers are not expecting your business to be perfect, so you need to be honest with them as you answer their questions. Disclosing problems or weaknesses or flaws during the discovery process is much better than allowing the Prospective Buyer to dig up something contradictory later.

In talking about your business and answering question after question about it, it is natural to feel defensive or to take certain questions personally, but try to rise above that and allow the Prospective Buyers to do their due diligence.

3. Talk with an Investment Advisor Before Selling Your Business

Once you have an idea of what the business may sell foryou’ll be wise to start putting a plan in place for the proceeds. As we discussed in our most recent blog post, “3 Reasons to Talk with an Investment Advisor Before Selling Your Business”, receiving a large amount of new money from the sale of your business can create new questions and difficulties that need forethought.

But most importantly a Registered Investment Advisor can assist you in planning how and where your proceeds will go to work on your behalf. It is also of great value to you to understand, as early in the process as possible, what kind of income you can expect that money to generate for you, once invested.

3 Things to Do Before Selling Your Business

A well-constructed plan can help make “life after your business” what you want it to be.

Let Others Help You

Selling your business may sound like a great idea, but the actual process of selling your business can sometimes be frustrating and emotionally draining. We acknowledge that many business owners are “lone wolfs” or “Mavericks” who have achieved success by following their instincts or “trusting their gut”. But getting to — and enjoying — life after your business may require some teamwork. As Registered Investment Advisors, you can count on us for confidential discussions and fiduciary guidance before (and after) you sell your business.

KKRA Registered Investment Advisors Seattle

To learn more, download our free eBook “The 3 Questions You Should Ask an Investment Advisor Before You Sell Your Business”.

Talk with an Investment Advisor before selling your business

Ned Karren is a Chartered Financial Analyst and a Registered Investment Advisor. He is a founding partner at KKRA, opening the firm in 1983. Ned earned a degree in Economics at BYU (1967) and an MBA degree from Northwestern University (1969). He is a portfolio manager and holds primary responsibility for the KKRA’s Growth Equity Strategy.