Sell a business - why and how to do it?

Who is selling their business and why?

Many of you are probably wondering if it is possible to sell a business and, if so, how to do it without losing money. I will sell my business, I am looking for an investor, I will join forces. These and other questions are bothering entrepreneurs today, when the economy is collapsing all over the world. The current pandemic is having a devastating effect on the proper functioning of the entire economic system. The decision to sell a business is a very serious challenge for people who, for various reasons, cannot bear the costs generated by the business they run. The problem affects micro and small sole proprietorships in particular, but not necessarily the smallest ones. Small businesses are usually family companies that bring together almost all family members, who work with full commitment and dedication towards a common goal. This raises the question: Should I sell my business? How do I do it? When? To whom? And for how much?

The Polish government, in the current conditions of the COVID-19 virus, has promised financial aid for businesses. However, not everyone can afford it and not everyone is affected by it. Protecting jobs seems to be a priority. So how can you run a business if the associated costs are not only for the employees, but also for the entire costly organizational infrastructure? It is not difficult to guess that without such a background, it is impossible to make a profit. So, if our final thought is the decision to sell the business, in the above circumstances, let's do it wisely and build a strategic plan with the help of professionals.

What types of business do we sell?

The type of business being sold is not entirely irrelevant and certainly requires an individual approach if we are considering who should buy our company. The sale of a business will therefore vary depending on the type of business, whether it is trade, manufacturing or services. After all, a small business is managed differently from a business with a complex structure. A small greengrocer's, a beauty salon, a laundry, a family-run bakery or a florist will require individual price negotiations. Large companies with a lot of capital, on the other hand, must be evaluated in great detail. The buyer will also want to know as much as possible about the business being purchased. They will want to know the suppliers the previous owner cooperated with, the contractors receiving goods, or the customers of the business who are accustomed to the place and services and are happy to visit it.

Ways to sell a business

When the idea of selling a business comes to fruition, each seller should consider how to do it most profitably. Taking into account the type and size of the business, it is possible to choose the method of sale. There are many companies and financial brokers on the market that specialise in the sale of businesses. After all, some of the companies sold have up to fifty or more employees, while others are quite small, with only one or two employees on the payroll.

The unquestionable advantage of entrusting the sale of your business to such intermediaries is their professionalism and experience. The second, very important issue is the price we will have to pay for such services. Smaller businesses can be taken over by individuals, larger ones by local investors or industry competitors who are willing to take advantage of such a transaction to gain access to the local market and thus eliminate the competition.

Company valuation when selling

Valuation is a process that determines the actual value of a company. The valuation takes into account, among other things, the value of the company's assets, securities, patents, trademarks, place of business, business activity, etc. The economic situation in which the transaction takes place and the question of timing and necessity can also be decisive factors in the price of the business being sold.

Every commodity fetches the price the buyer is willing to pay – true, it would seem obvious! However, in economics, certain methods of valuing sales have been developed. These include the asset method (adjusted net asset method), the income method (discounted cash flow), and the comparative method (similar company value). A reliable valuation allows us to correctly determine the actual value of the business we are selling.

To sum up, we can sell on our own or we can commission professionals. However, let's remember that based on specific economic data, we will determine the actual value of the object of our sale. This allows us to avoid misunderstandings about the value of the transaction and discrepancies in the expectations of the parties.

//M.K.

Illustrative photo

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