When is a good time to sell your business? As we enter into the new year, this could be a question you are asking yourself. In the midst of a pandemic and recession, many businesses didn’t make it out of 2020. However, there are many businesses that have been thriving that are attracting eager buyers. As always, the best time to sell your business is entirely dependent on you and the company’s overall readiness.
Prepare to Sell Your Business
Buyers are very interested in buying good, profitable companies that still have ample room for growth. That said, some industries are more desirable than others. As we look at the businesses that have been profitable recently, we see most in the healthcare, distribution, construction, manufacturing, and service industries. These businesses have stood out in 2020 and buyers are eager to enter into recession-proof markets.
If you are looking to sell your business in 2021 the time to start the process is now. The average time it takes to sell a business is 6-10 months. To expedite this process, here are some key things to get in order:
Financials
When it’s time to put your business on the market, make sure your financial paperwork is clean. Income statements, balance sheets and tax returns are just some of the documents a buyer will want to review. Additionally, many of these documents will be going to the bank for review so that the Buyer can secure financing. It’s important to have clean financials so that the business is presented in the best and most accurate light. Additionally, the pricing of the business is based on what the financial documents show as cash flow.
Develop Your Exit Strategy
When you sell your business, will you stay on during the transition? Or, will you step away immediately to begin your next adventure? What happens after the sale is as important to think about as the sale itself, particularly if you have a team of trusted employees. In addition to the many other steps involved in preparing to sell your business, the most crucial is simply having an exit strategy. Whether you have formalized this succession plan with a wealth manager or simply have an idea in mind, knowing what you want to do and how much money you need to do it is valuable before listing a business for sale and accepting a potential offer from a buyer.
Determine Your Business Value
Our office includes an accredited business valuation specialist who will work with you to determine the value of your business using an earnings multiple. As mentioned above, the financial documents will assist in deriving the value of the business. Our office takes an in-depth analysis of the current and historical financials and performs a number of business valuation techniques, including market comparables, to arrive at a number that the Seller should expect to receive in a potential sale. It is necessary during this time to keep expectations as realistic as possible because the real business value is only what someone is willing to pay for it in a prospective business sale. Know your value and what you expect to walk away with before deciding to officially sell your business.
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Talk to us today!
Edwin Mysogland, CVA, CEPA, CMEA
Managing Partner, Indiana Business Advisors
Indiana Business Advisors is the top business brokerage firm in the state of Indiana and one of the largest in the Midwest. Whether you are looking to a buy a business or sell a business, Indiana Business Advisors has the expertise and experience to get the deal completed. With over 40 years of history and 2200 businesses sold all over the United States, our team will work diligently to achieve your professional and personal goals.