Seven Steps to Selling Your Business

Owners of small businesses — like many insurance agencies — spend more of their time working on today’s issues than tomorrow’s potential. It’s an approach that may keep the doors open for now, but what about when they’re ready to retire, or no longer have a desire to run their businesses?

As mid-sized to large businesses grow, owners typically realize they’ll need to find a way out, but most small business owners do not have an exit strategy. Rather than simply selling inventory and closing the doors, the suggestion is that small business owners can increase their wealth by capitalizing on the goodwill or customer base they’ve built up.

But if they want to sell their businesses, owners should employ a similar strategy they might use in selling their house: Make it look as attractive as possible to the buyer by making an investment in repairs and improvements.

Here are some basic business practices that many entrepreneurs overlook, but can help keep the company buffed up and ready for the marketplace.

Write Down Processes

One can’t sell a business that is in one’s head, so write everything down. Entrepre-neurs don’t typically like dealing with details and the fine points, but they must document how everything works in their organization to make it attractive for sales.

For example: Spell out the roles of management and employees, not titles, but their actual responsibilities. Or describe a typical customer visit. Franchise companies list these types of details; a small business owner can use the same tactics to show the value of their company to a potential buyer.

Set Financial Goals

One cannot sell a business that is not making money. How does one know if a business is growing if one doesn’t know where it started and where it’s going? Once some target goals have been set, measure them on a regular basis. Look at the internal processes of your business and make sure they are still working for customers and the company alike. A business may be pleasing customers, but is it making money?

Know what your return on investment is, so you can explain it to interested buyers.

Have a Marketing Plan

Many small business owners don’t allocate money for marketing. A marketing plan, with a corresponding budget, is key to attracting and keeping customers.

One rule of thumb is to spend the equivalent of one staff salary on your marketing and advertising. Think of it as a “silent” employee working 24/7. Market awareness of a brand and demonstrated customer loyalty can dramatically increase the value to potential purchasers. Marketing is the last thing one should cut — even if times are bad.

Track Customer Information

Often, the most valuable aspect of a business to a potential buyer is its customer list — especially if the potential buyer is a competitor. Keeping track of customer contact information including names, addresses, phone numbers and e-mails (along with permission to contact them electronically) is a must.

Being able to deliver customer profiles and buying habits to a new owner demonstrates how well a business is run and makes a customer list invaluable. If business owners lack customer data, they’ll be in trouble.

Keep Employees in the Loop

A staff represents a company to customers and buyers alike. Make sure they know your goals. Communicate with your employees and ask for ideas. If one has decided to sell because the business is in trouble, let them know. It is unlikely to be a surprise and few things demoralize a staff more than having to rely on water cooler rumors. Try to avoid staff salary cuts if possible. Employees are the face of a business and a salary cut may backfire. Try looking at business processes and finding ways to save money instead.

Look with a Buyer’s Eyes

Ask what information you and your professional advisors would require if you were purchasing the business. Then develop a plan to provide such information as: historical financial statements and tax returns; ownership structure; key management bios (who will be key to the future success); where’s the niche? (what is special about this company); litigation and other disputes; other risk factors.

Identify the areas of a business that need improvement and look for specialized help to simplify those processes. Make sure to test them before the potential buyer does. Don’t ignore one of the most vital elements of a business plan: the exit strategy. With careful planning and monitoring from day one, a business owner’s last days of business can bring rich rewards.