7 steps to selling your freelance business
If you read our post last week about selling your freelance business and think it may be the path for you, here's how to make it happen.
1. Plan way ahead
If business is booming, there’s a good chance you’ll get a few offers from interested buyers before you’ve decided to sell.
In absolute terms, the numbers they’ll offer sound big. You might not be used to someone offering you hundreds of thousands of dollars for something you own.
Such sums of money are tempting.
However, failing to plan for your business sale without planning for it is not a smart decision. It’s easier to have people come to you, but there’s a high chance you won’t get what your business is worth.
So set a date when you’d like to sell your business, then begin planning for it. Doing so will help you strike a fair deal with your inevitable buyer — but it’ll also motivate you to grow the business as much as possible to maximize the payout.
2. Clean everything up
You must tidy up everything so you have a nice and neat business to sell.
First of all, pore over your accounting and bookkeeping to make sure things are correct. The numbers here have to be dead-on for your valuation to be accurate. If you don’t have an accountant or bookkeeper, hiring one can help immensely.
After that, tidy up your standard operating procedures. Procedures and systems are assets that add value to your business, so document and standardize everything you can. Buyers like the ability to start running the company out of the gate, after all.
Make sure your analytics are accurate and up-to-date as well. Having accurate numbers for essential metrics like conversions and traffic lets you show your buyers how well your business is doing. This can reduce uncertainty for the buyer, making them more willing to move forward with the deal.
3. Find your business’s valuation
Now that your records are cleaned up, you need to find the value of your business.
There are three methods of finding your business’s value, but the easiest one is called the discounted cash flows method.
This method attempts to calculate the business’s value today based on the future money it will make.
To explain, look at it from the buyer’s point of view: what would matter most to you if you were buying a business?
For example, imagine you are buying this site comparing the best nursing schools.
You’d probably look at total revenue (and where that revenue comes from) and compare it against site traffic.
You’d also look at what kinds of assets and debts it has and other financial information that indicates profit and cash flow potential.
Now, make sure you look at all your assets — that includes digital assets.
With all this in mind, you can also invest in professional valuation services. Some Certified Public Accountants (CPAs) specialize in business valuations, and larger CPA firms may even have a team for valuations. The price you pay buys you the convenience of a professional valuation with no work on your part.
You can also engage with M&A firms, but those are generally for larger business sales.
4. Prepare financial documents
Nearly every party involved in your business sale — from the buyer to your attorney — will be scanning through your financial records. This is why tidying up your bookkeeping is vital.
In particular, buyers and other interested parties will want to see at least the last three years of your business tax returns, balance sheets, cash flow statements, and income statements.
A CPA can help here, especially if they specialize in business sales. They have the tax, financial, and M&A experience to help out.
5. Get help from a broker
Selling a business can be arduous, as you can see from the previous steps. You also have to find buyers, negotiate the sale, ensure the legal stuff is handled, and so on.
If you aren’t careful, you could waste time and lose out on possible profits from the sale.
That’s where hiring a business broker comes in.
Business brokers often have a network of suitable buyers, making it easier for you to sell your business at a fair price. They’re also connected to accountants, attorneys, and similar experts that can help sell a business.
Brokers can also help with the sale itself — facilitating negotiations, doing due diligence, and helping you maximize your proceeds.
Ideally, your business broker should have experience brokering sales of your type of business.
For example, if you’re a freelance digital marketer, find a business broker who’s worked with digital marketing agency owners and similar professionals.
6. Find good buyers
Now, it’s time to find buyers.
These have to be qualified buyers, though.
Remember, you share private financial (and other) information with any party involved in the sale. Some buyers might be competitors looking to gain insider knowledge about your company.
Even among your legitimate buyers, you want a few offers. You don’t want to be in a position of desperation, forced to take the one offer handed to you.
Again, a reputable business broker is a huge help here. They can tap their network of buyers to get you legitimate offers in less time.
7. Finalize the legal stuff
You’re almost done selling the business — time to close the deal.
You should have an attorney with contract law and business sales expertise help here. There are plenty of legal documents — many can be tens of pages — so doing it yourself leaves you vulnerable to pitfalls.
You’ll likely have to notify your state’s business registration agency that you’ve transferred your interest in the business. They can provide you further guidance on remaining legal matters pertaining to your business sale.
Tips to maximize your sale proceeds
Sell when your products are well-developed
One of the best times to sell is when you’re doing a healthy sales volume, but your product is in the maturity stage of the product life cycle.
The high sales volume increases your business’ value, but you exit as the product still has enough room for growth left to excite buyers.
Hammer down on growth
Once you set a date for selling your business, hammer down on growth. The more you can grow your company, the more money you’ll fetch when selling.
Not to mention the increased cash flows you’ll see during the remainder of your tenure as owner.
Improve your website and customer experience
Today, your business’s website is one of your most valuable assets. It’s where clients and customers the world over find, learn about, and hire you.
Spend some time upgrading your site. Make sure it has a clean, modern design and that it’s as fast as possible.
Invest some time into SEO as well. High search rankings are quite attractive to buyers because they mean more traffic and money. There are a lot of SEO software tools online that can help you evaluate your search rankings.