Selling a small business: it’s all about finances

An entrepreneur who wants to sell a small business now or in the future should always be well prepared. One of the most important steps is to anticipate all financial issues.

Selling a small business is all about finance

You need to sell a small business and you hope to get the best price for it. Whether you want to start a new career or enjoy a well-deserved retirement, selling your small business is a great cash flow opportunity. Provided you have strategically prepared your exit and get the highest transaction value. Or at least, the one closest to your ambitions. Here are 7 steps to “financial cleanup” to make sure your business looks its best.

7 actions before selling a small business PME

1. Organize your papers

The decision to sell an SME is not made overnight. Putting all the documents in order, preferably a year or two before starting negotiations, allows you to raise possible administrative difficulties. If any papers are missing, you will have time to put them in order. This will reassure potential buyers by showing the image of a methodically managed company. Gather, for the last 5 years, proof of profitability, bank statements, income tax returns, leases, safety reports, contracts and various information on employees and customers.

2. Transfer your personal property

Anything you wish to keep after the sale for personal use should be transferred into your name. This strategy effectively increases the cash flow of your small business. The transferred assets are not reflected as an amortized loss on your balance sheet, making the business more financially attractive to your potential buyers. Be sure to identify and transfer these assets prior to signing to avoid any confusion or complications during negotiations.

3. Conduct the business assessment

Engage a third party to perform a value assessment of your small business, determine the growth potential and risk assumed. The consultant looks at financial data and macro variables such as competition, economic trends and market demand. Depending on its financial health, the value of your business should be between 2 and 6 x your annual cash flow.

Read also: How to assess the value of a business?

4. Maximize your sales

Your prospective buyers want positive cash flow and stable or increasing sales. This may require diversifying your customer base, boosting sales through marketing campaigns and other promotions. Prepare a growth strategy for after the sale, so that the buyers also have a vision of the company’s future.

5. Find an effective intermediary

Selling an SME, with the increase in the number of digital intermediaries, exposes you to a large number of solicitations. A professional consultant can help you quickly sort through the serious applications, simplify negotiations and transactions. Not only can this help you get the best price for your business, but it can also help you deal with legal difficulties.

6. Set up your payment structure

When the price is negotiated with your buyer, you must also agree on how you will receive payments. You can receive a lump sum – being careful of the tax consequences – or you can ask for a benchmark, a multi-year payment plan. You can also negotiate a loan against your company’s assets or a portion of the profits generated after you leave.

Read also: How to structure the sale of your business?

7. Withdraw from managerial functions

As you go along, simplify your business and limit your involvement in the company. Before selling a small business, don’t neglect knowledge transfer and delegate administrative and management functions. Make sure your buyer has the support and resources to get the business up and running. Prepare your employees and adjust your business strategy to ensure that your small business can thrive without you.
If you need additional help selling your business, contact Actoria professional consultants, dedicated to getting the most out of your business.