From Passion Project To Lucrative Exit: How To Sell Your Small Business
What started as a passion project from a cozy coworking corner turned into an incredible lifestyle and a highly profitable business. But now you feel it is time to move on and explore other horizons. So how do you sell your small business and move into your next level of freedom?
In this guide, I'm sharing key steps to prepare your service-based business for a successful sale. We'll cut through the complexity, spotlighting what really matters in the journey to a rewarding business exit.
Ready to play the game right? Here are the 5 steps to get your business ready for a life-changing sale.
Step 1: Know Your Worth
Knowing your business's true worth is key to a successful exit. Examine your finances and growth potential closely. Since M&A experts focus on larger enterprises, you'll likely need to handle the initial valuation yourself. Start with a free, reliable online tool (we can get you ours) to compare your business against recently acquired similar ones in your industry. This self-assessment is crucial in setting the stage for your sale.
Let’s have a look at a business in the professional education space turning over just above $1 million a year. Initially, they undervalued their recurring revenue streams and customer loyalty. After a thorough valuation their business’s worth increased by 25%. This valuation attracted higher-caliber buyers and set a new benchmark for their selling price.
Step 2: Make Operations Run Like Clockwork
As you sell your business, you are no longer there and the business will need to continue working. Efficient ways of working and a team that runs like clockwork are key to any business that can thrive in the absence of its owner. So before embarking on the selling journey, make sure you focus on creating systems and processes that enhances workflow, supports your team and increases client satisfaction. This not only eases your daily management whilst you are still in charge, but also positions your business as a well-oiled machine to potential buyers.
Step 3: Get Mentally Ready
Selling your business is a big emotional deal. It's more than saying goodbye to your brainchild; it's closing an amazing chapter of your life. Thinking of selling might make you feel proud, a bit sad, or even unsure about what's next. That is totally normal! Chat with mentors or friends who've been there, done that. They can help you sort through those feelings and get excited about your next chapter.
In his book ‘Before The Exit: Thought Experiments For Entrepreneurs’ Dan Andrews testifies about the emotional impact selling his business had:
“Mostly, I wish I’d considered how emotional the process was going to be. Emotions are everywhere in the selling process. They both blind and motivate us, and they lead many of us to settle for less when it matters most.”
Step 4: Seek A Buyer Who ‘Gets It’
Finding a buyer isn’t just about securing the best financial offer; it's about aligning with someone who shares your vision and values. Evaluate potential buyers on their track record and future plans for your business. The right match ensures your legacy continues in good hands.
A well-established, highly profitable yoga and wellness studio with dedicated clients was really selective about their buyer. The owner turned down several higher offers for a buyer who was a long-time client and understood the studio's ethos, much to the relief of its dedicated yogi clientele.
Step 5: Hand Over With Care and Without Earnout
The transition phase is critical. All the effort you put into streamlining operations will help you to handover your business in a way that is seamless and short, avoiding that you need to stay onboard for multiple years. You want to ensure that the core values and operational ethos of your business remain intact and reassure both the buyer and your clients, safeguarding the business's future success.
When a web design agency , sold, they had as little as a 1-month transition period where the original founder worked closely with the new owners. This period allowed for a seamless transfer of knowledge and operations and for maintaining team and customer confidence.
Reflect and Act: Your Practical Roadmap
As we wrap up our journey through these 5 essential steps, it's time to turn insights into action. Here’s a straightforward plan to get you started:
Grab a notebook or open a digital document. Reflect on each step we've discussed.
Rate your business on a scale of 1-10 for each area: valuation, operations, emotional readiness, buyer alignment, and transition planning. Where do you stand?
Which step scored the lowest? That's your starting point in your journey to sell your lifestyle business.
Let's keep redefining what success means to us as freedompreneurs. Your next big move awaits, and it's as promising as the journey you've embarked upon.
