How to sell a business: 7 urgent steps you need to take right now

by Kara Laws
Contributing writer
All business owners should be creating a business they can sell later. This is especially true in our small towns where we see too many Main Street businesses closing up shop.
One day you will want to retire. And you only have two options: 1) Close down and walk away with nothing or 2) sell your business to fund your retirement.
Your small town doesn’t want to see you close and you don’t want to walk away with nothing. So, let’s learn how to create a business you can sell.
Selling a business is not as easy as just putting up a “for sale” sign. There is a process that you need to understand.
I have broken that process down into seven steps.
Step 1: Learn How
to Self Fund
Did you know your business can fund the sale of itself? We often think of selling a business as a buyer coming with all the cash and risking their own assets to buy our business.
It doesn’t have to work that way. If you set your business up correctly, your business can fund its own sale.
So instead of fully funding with a personal loan, the business can take a loan against itself using the businesses current assets and credit.
Step 2: Separate Entity
Stop being a sole proprietor. Make sure your business is at least an LLC so it is a separate entity from you.
You cannot sell a sole proprietorship. You can sell the supplies. You can sell the inventory. But you are not actually selling the business because the business is you.
This means that you cannot use the business credit, merchant accounts, or history to fund the sale of your business.
Step 3: Correct Accounting
The SBA is not going to approve a business loan to buy you out, if you cannot show that your business can support the loan.
Start tracking your accounting correctly right now. You want details in your accounting.
Single line entry accounting (where you do one entry that just says “SALES” each month) is not going to cut it.
Your accounting should easily be able to detail where money is going, how frequently, and what expenses will carry over with the business.
Step 4: Build Intangible Assets
We all understand tangible assets: a building, inventory, equipment, etc. Your business should also be collecting and tracking intangible assets.
Intangible assets can include: a website, a customer list, systems and training, social media followings etc.
Each of these items add value to your business. They make it easier to loan against, they show a more viable business, and they increase your asking price.
Step 5: Replace Yourself
If your business cannot function without you, you will not be selling a business. You will be selling a job.
People and lenders are significantly less likely to invest in buying a job vs a business.
We all have jobs and we are quite busy with them. If we are required to be in your business ten hours a day, that is a problem.
Build the staff and create the systems so your business can run without you.
Step 6: Find the
Right Sales Team
Long before you list your business you want to talk to a Business Acquisition Attorney and business broker. Start vetting attorneys and building relationships right now.
Oftentimes a real estate agent is not enough to sell a business. They are trained to sell buildings. Sometimes those buildings happen to include businesses.
Most real estate agents will not understand business backed finances, the long SBA loan process, or how business valuation works.
Step 7: Build
Business Credit
In an effort to make selling your business as seamless as possible you want to start building business credit right now.
You can build business credit by making sure your personal finances and business finances are completely separate, applying for a free D-U-N-S number, opening a business line of credit, and using vendors that report credit history.
The longer your business credit history, the easier it is for your business to get funding when you are ready to retire.
There are, of course, additional things that you can do and mistakes to avoid when you are actually ready to list your business.
The steps above are things you want to apply right now.
Start this process today so your business is ready when you are ready for a new stage in life.
Good luck, and happy retirement!