The Good Years: How to Determine When It’s Time to Sell and How to Prepare Your Business for Sale
You have owned your shop for the past several years, and you’re thinking it is time to retire. Your children have successful careers and have no interest in owning your shop. You are now considering selling your business. You need to get the best possible price for it. You’re considering placing a lube shop for sale advertisement in an industry news magazine, but are you ready to sell? Most likely, you are not prepared to sell at the highest possible price. You may have been a successful business owner for several years, but you might not have ever sold a business. So, you’re not sure what steps to take to assure that you receive a fair price.
Selling Your HomeNo, that’s not a typo. Most small business owners typically do not have experience at selling businesses, but usually they have sold several homes in the past. Many of the steps you took to prepare to sell your home are also necessary in preparing to sell your business. Let’s first review some of the steps to use in selling your home at or above the current market value.
Step 1. Hire a professional to guide you through the process. An experienced realtor who has been involved with hundreds of sales could help you avoid many of the pitfalls in the sales process that will cost you significantly. They know the market and will do the research necessary to properly advise you on the best price to sell your home. They will also be able to suggest several steps you should take before it goes on the market.
Step 2. Have your home inspected by a licensed professional. This inspector will provide you with a detailed report on the condition of your home. This report will cover everything: building, major appliances, heating and air-conditioning unit, all electrical items and many others that could affect the price you receive or may cause the buyer to cancel the sale. Consider making repairs after getting estimates. After all, your potential buyers will hire their own home inspectors and, most likely, find the same problems.
Step 3. Curb appeal. This term is referring to the potential buyer’s first impressions. Spruce up the outside; freshen the lawn and landscaping. Paint the outside, and inside if necessary (usually needed). Absolutely nothing improves the buyer’s impression of your home as much as a fresh coat of paint.
Step 4. Hire a professional cleaning company. They can help improve your home’s appearance. Remove every item you don’t need to live in the home until it is sold. Remove family pictures and other personal items. The buyer wants to view the home as their own, not your home. You’re going to move soon, so pack up everything you can now, including unnecessary furniture. Yes, you loved them, but your potential buyer most likely will not.
Step 5. Pre-qualify your buyer. An exceptional offer from someone who does not have the means to purchase will only take your home off the market for several weeks. Require all offers to have either proof of funds and/or a preapproval letter from a qualified lender.
Step 6. When to sell? The best time to offer your home for sale is during a sellers’ market. A sellers’ market is when prices are rising, usually due to a low availability of homes for sale. Real estate is like the stock market. Many times, trying to catch the top of the market will be too late.
There are many other possible steps you might consider. View your home in the same way you view shopping for your possible new home.
Selling Your BusinessPreparing your home for sale is the essential action you can take to ensure you get the highest possible price. Preparing your business is even more essential.
Step 1. Plan your exit strategy in advance by consulting your financial advisor. Clean up your financial reports for the potential buyer’s review. Usually, your potential buyer will need financing for either part or almost all of your asking price. Their lender will ask for the past three years of your financial documents. Your financials must support your asking price.
Step 2. Hire a professional business advisor to review your financials, preferably three years in advance of your sell date. Seek their guidance in establishing your potential asking price. Remember this price is three years in advance, so it will be only an estimate. You have three years to increase this value. When you are closer to the sale date, bring them back for the current asking price. Consider hiring an automotive inspector to review the age and condition of your equipment. Repair equipment, if necessary and affordable. Be cautious; do not overspend believing that the buyer will completely reward you with a higher price. Your buyer will expect you to have maintained your equipment, not necessarily replaced them.
Step 3. Sell on the upside! Preferably with the last three years having sales and car count increases. Consider making changes to your marketing plan that will drive additional traffic. Look for ways to increase your cash flow to improve your financials.
Step 4. Prepare and update. Just like preparing a home for sale, you’ll want to take a look at — and maybe enlist a professional to help with — clutter, curb appeal, cleanliness and, most of all, paint. Your goal is to have your entire shop (including lower bay) looking like new. Most every shop collects stuff over time. Ask yourself, “Why is this important, and does it improve my service?” If the answer is not positive, get rid of it. Are there other needs? Is the drive in need of a new coating or is maintenance needed in other areas of the shop? Does the roof leak? What is the condition of the air conditioner and heating unit? What other items would you review before YOU made a purchase offer?
Step 5. Consider picking the low hanging fruit. Who would gain the most by buying your shop? Many times, it’s your competitor. Taking over your location and customer base would enhance their position in the marketplace. To save your marketing expense, contact them first to explore their interest.
Step 6. When to sell? The best time to sell is when you’re setting sales and car count records. If you’re past three years have produced a constant increase, maybe it’s time to reap the rewards.
Close The SaleDon’t expect an immediate result. The sales process, many times, is a long road. Have patience; don’t jump at the first person who is interested. Are they really interested or just kicking the tires? Before you start disclosing confidential information, both you and the potential buyer should sign a nondisclosure agreement. Not only does this agreement protect you, but it is also the first sign you have a serious buyer. Cash flow is king — cash coming in vs. cash going out. Use your three-year planning period to pay off debt.
Two items to consider before you go to market: Are you willing to finance a portion of the total sale amount? If so, you usually will receive a higher price. Are you willing to keep working with them for a time? Would you be a consultant for a time? If so keep these periods as short as possible. Both could assure their success.
Take a look at your books. Has business been good? What does 2019 have in store for you?