What started as your passion project has turned into a highly profitable business. But now you feel it's time to move on and explore other horizons. So how do you sell your small business and move to the next level of freedom?
This guide provides important steps to prepare you for successful sales of your service-based business. Solve complex problems and focus on what really matters for a rewarding business exit.
Ready to play the game? Here are five steps to prepare your business for a life-changing sale.
Step 1: Accurate Business Valuation – Know Your Value
Knowing the true value of your business is the key to a successful exit. Take a closer look at your financials and growth potential. M&A specialists focus on large companies, so you'll likely need to do the initial evaluation yourself. Start by comparing your business to similar businesses in your industry that have recently been acquired using a free and reliable online tool. This self-assessment is critical to being ready to sell.
Take a look at a business in the professional education field with annual sales of just over $1 million. Initially, they underestimated recurring revenue streams and customer loyalty. As a result of a thorough evaluation, the value of their business increased by 25%. This reputation attracted more qualified buyers and set a new standard for sales prices.
Step 2: Streamline operations – run like clockwork
When you sell your business, you are no longer there and the business must continue to operate. Efficient working styles and a team that works like clockwork are the keys to any business succeeding even without an owner. So before you embark on your sales efforts, be sure to focus on creating systems and processes that enhance your workflow, support your team, and increase customer satisfaction. Not only does this make day-to-day management easier while you're in charge, but it also positions your business as a well-oiled machine to potential buyers.
Step 3: Mental Preparation – Be mentally prepared.
Selling a business is a big emotional event. It's not just about saying goodbye to your brainchild. It will be closing a wonderful chapter in your life. When you think about selling, you might feel proud, a little sad, or anxious about what will happen next. That's completely normal! Chat with mentors and friends who have been there. These will help you sort through those feelings and get excited for the next chapter.
In his book Before The Exit: Thought Experiments For Entrepreneurs, Dan Andrews attests to the emotional impact of selling a business: Emotions are omnipresent in the sales process. They not only blind us, but also motivate us, leading many of us to be content with less when it matters most. ”
Step 4: Match with your ideal buyer – Find buyers who “get it”
Finding a buyer is more than just securing the best financial offer. It's about aligning with someone who shares your vision and values. Evaluate potential buyers based on your business's track record and future plans. A proper match will ensure your legacy continues.
An established and profitable yoga and wellness studio with a loyal clientele was very selective about its buyers. The owners turned down several high-ticket offers to buyers who had been long-time customers and understood the studio's ethos, much to the relief of its loyal Yogi clientele.
Step 5: Smooth Transition – Carefully hand over without any arnaouts
The transition phase is important. All efforts focused on streamlining your operations will help you take over your business seamlessly and quickly, avoiding being stuck in your business for multiple years. We want to ensure that the core values and operating philosophy of the business are maintained, reassuring both buyers and customers and safeguarding the future success of the business.
When the web design agency was sold, there was only a one-month transition period during which the original founders worked closely with the new owners. This period allowed us to seamlessly transfer knowledge and operations and maintain the trust of our team and customers.
Think and Act: A Practical Roadmap
As you wrap up your journey with these five important steps, it's time to put your insights into action. Here's a simple plan to get started.
- Pick up a notebook or open a digital document. Look back at each step we've covered so far.
- Rate your business on a scale of 1 to 10 for each area: Valuation, Operations, Emotional Readiness, Buyer Alignment, and Transition Planning. where do you stand?
- Which step did you score lowest? That's where you start your journey to sell your lifestyle business.
Let's continue to redefine what success means to us as freepreneurs. Your next big move awaits, and it's as promising as the journey you started.
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