If you’re the owner of a popular local hotspot or a large manufacturing business that counts its annual revenue in the millions, valuing the company and finding a buyer for it is not a difficult thing to do. Investors and eager entrepreneurs line up for opportunities like that.
But what options are available if you want to sell your small, home-based business that brings in $60,000 in a good year?
Is that even possible?
The answer is yes, it’s not just possible, but it happens all the time. While the basic business selling principles that apply to large companies hold just as true with home-based businesses, there are also some unique considerations home business owners should be aware of.
The Basics of Selling a Business
These tips apply to selling any kind of business, and they simply need to be scaled to meet your unique business needs:
- Maintain clear and accurate records – A prospective buyer will want to objectively assess the financial health of your business. They’re going to do so by reviewing tax records, financial statements, and other important business records. If yours are unavailable, illegible, or incomplete, you’ve lost a buyer.
- Ensure your business can run smoothly without you– It’s important for a prospective buyer to be able to see themselves taking over the helm without the business floundering. It’s up to you to set up the right systems and processes to make that possible.
- Keep pushing to the finish line– It’s human nature to start easing off the gas when we see the end coming. But the final days and weeks leading up to the sale are when the buyer is going to be most concerned about how the company is functioning. It’s definitely not the time to let opportunities slip by.
- Don’t forget about curbside appeal– Make sure the facilities, equipment, staff, vehicles, and everything else that represents the company looks neat, clean, and orderly. Just like when you’re selling a house, a fresh coat of paint and well-kept front yard can work wonders in making the buyer’s first impression a positive one.
Factors Unique to Home-Based Businesses
Using a Broker
For large companies where sales can range into the millions of dollars, hiring a professional business broker is vital to a successful sale. Although that’s still an option for small, home-based business owners to consider, it may not be necessary. That’s because a broker works on commission and their profit comes from the proceeds of the sale.
Using a broker for a small business sale could potentially have one of two negative outcomes:
- You could sell the business but be unhappy with your profit because 10-15 percent went to the broker.
- Your broker could be less motivated to work hard selling your business because 10-15 percent of the final sale price isn’t much.
To avoid these possibilities, many home business owners decide to handle the sale on their own.
The Cult of Personality
Another important issue to consider is the fact that many home-based businesses have been built up surrounding the owner’s personal and professional relationships and network. If this is the case and handing existing customers, vendors or suppliers over could leave the new owner in a precarious position; a smart buyer will walk away.
The best way to resolve this issue is to be transparent up front with both buyers and customers. When a buyer shows interest, make sure your customers are aware you may be selling. When the timing is right, introduce a serious buyer to them. It can also help if you offer to stay on with the company for 1-2 months after the sale to assist with the transition. This ensures the new owner gets up to speed with the customers and allows the customers an opportunity to get to know the new owner, putting both in the best position to succeed.
Selling a home-based business is definitely possible, and it can be profitable too. It’s vital to follow the best practices that affect all business sales and to pay equal attention to the unique issues involved with selling a home-based business.
Bruce Hakutizwi is the U.S. and international manager of BusinessesForSale.com, a global online marketplace for buying and selling small- and medium-sized businesses. With more than 60,000 business listings, it attracts 1.4 million buyers every month. You can connect with him on LinkedIn.