How Do You Know if Your Business is Sellable?

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Businesses come in all shapes and sizes, ranging from small one-man operations to multinational corporations across countless occupations and industries. Every business is different, and they all have their own unique aspects.

Some serve small and very targeted customer bases, while others do business with virtually all demographics. Some require specialized knowledge to own and operate successfully, while others just require an entrepreneurial spirit and a strong work ethic.

Whatever type of business you have, there is one question you may have asked yourself at one point or another, “is my business sellable?” In other words, can your business attract potential buyers and produce a substantial payout for you if you decide to sell?

Even if you are not planning to sell your business within the next year or even the next few years, it is still a good idea to examine its salability for a couple of reasons. First, every owner plans to retire someday, and it is good to know that you have a future payout to look forward to when the time comes. Secondly, you never know when circumstances might change, and you may have to sell sooner than you originally planned.

Here is another good reason to approach your business from the standpoint of sellability. A business that can sell for a reasonable price tends to be a successful business. And if the value of your business is lower than you hoped it would be, then it might be time to look at ways you can improve its operation and boost its value.

If you are unsure about whether your business is sellable, here are six critical questions to ask yourself:

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Could your business run without you if you were gone for a couple of weeks or longer?

This is one of the most revealing questions when it comes to whether your business is salable. In many small businesses, the person at the top is essential and virtually irreplaceable. If this is your situation and you hope to sell your business at some point down the road, you will need to make yourself more dispensable. One of the best ways to accomplish this is by implementing processes that others can plug into and replicate. Another good step is to start delegating important responsibilities to some of your trusted staff.

Does your product or service have a unique selling proposition in the marketplace?

Every successful business has what is referred to as a unique selling proposition (USP), something they do better than almost anyone else. For example, maybe you make the best-tasting ethnic food in your area, or maybe your business is known for providing exceptional customer service. If you have never done so, it is important to identify your USP and focus on becoming even better at it. Otherwise, you are nothing more than a commodity.

Do you have plans you have implemented that are designed to help your company grow?

A successful business does not rest on its laurels. No matter how good your sales are and how large your customer base is, you should always be looking at ways you can grow. If you do not have a clear future growth plan, now is the time to implement one.

Do you have a staff that knows, understands, and is committed to your growth plan?

The quality of a business usually comes down to the quality of those who work in it. How much confidence do you have in your employees and staff? Are they dedicated to doing their part to help your business grow?

Is your profit margin in line with industry standards?

If your business is turning a profit, how does it measure up with comparable businesses in your area? Buyers will want to know if your profits are in line with others in your industry, and if not, why not?

Is your business on an upward or downward growth trajectory?

How have your sales been over the past few years? Have they been growing or declining? If they are growing, this is a significant plus for prospects who are looking to buy. But if they are declining, this might be cause for concern unless there is a good explanation (such as a Covid-related shutdown). If your sales are on a downward trajectory, for which there is no good reason for this, it is important to take steps to move things back in the right direction.

The bottom line in all of this is to consider what buyers want more than anything else, which is a predictable future profit stream. If your business can project this to potential prospects, then you will be well-positioned to attract a good price when it comes time to sell.

When is the Best Time to Sell Your Business?

There is no right answer to this question that applies to all business owners. The closest thing to a uniform answer would be that the best time to sell your business is when you are most ready.

If you are looking at the time of year, the first quarter is always a good time to put your business up for sale. The start of a New Year is when many individuals are looking to get into a new venture. The current environment as we enter 2022 is also good for business sellers, so this is something to consider as well.

If you are thinking about selling your business this year or just want to find out how salable your business is, the best place to start is to speak with a local business broker. Business brokers work closely with sellers to help them prepare the business for sale and navigate the complexities of this type of transaction.

A reputable CPA and accounting practice broker can give you an honest opinion of what your business is currently worth. In addition, they can tell you what steps you could or should take to improve its standing in the marketplace and what to expect if you decide to sell.

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