How to Sell Your Small Business? Can You Sell It?
Out of the 60 Companies Worth Buying in the U.S. in 2024 Listed on Sellingpower.com, 48 Are Large Businesses, 11 Are Medium-Sized Businesses, and Only 1 Is a Small Business.
This data, coming from the U.S., the richest job market in terms of data, reveals your sales potential based on the scale of your business.
While there are no strict rules, boundaries, or figures in company sales, you can be sure that the larger your business scale, the higher its sales price.
Why?
Behind what we call scale in business lies simple math:
Scaling occurs when your company's revenues grow while costs decrease, remain steady, or increase at a slower rate than sales.
Since scaling means your company's revenues grow faster than its costs, the business generates more free cash flow each year for the owner.
A company with consistently growing free cash flow will always have a high price tag.
The reason only 1 out of 60 companies worth buying in the U.S. is a small business is that small businesses lack the scaled balance sheets and income statements.
A small business, in the eyes of potential buyers, is still in the business development phase. It may cover the owner’s bills and finance at least part of their lifestyle, but it’s hard to argue that it creates value beyond covering expenses.
So, if you decide to exit your small business for valid reasons, how can you cash in the value you’ve created so far?
Here are a few suggestions:
- You can sell your customer list/contracts.
- You can sell standalone products like books or software that include your intellectual property.
- You can sell your fixed assets.
- You can sell intellectual property related to products in the R&D phase.
Additionally, you can sell any assets on your balance sheet that you believe will generate sales in the future.
The biggest challenge in selling your small business is that the business cannot exist without you. The more you work in your business as an employee/technician, the harder it becomes to sell it. However, if you have a strong customer list, sales contracts spread over at least six months (preferably years), or an excellent product list in development through R&D, you can negotiate a role or new job for yourself with the buying company while selling those assets.
If small business owners have attractive assets on their balance sheets as outlined above, their most significant potential buyers are often larger competitors.
If you are a small business owner and feel it’s time to exit your business, we recommend considering larger competitors as your first potential buyers. If you have a solid balance sheet with future sales potential, your competitor may purchase your business for a higher price than you expect and even offer you a fantastic job opportunity in the new organization, making you more comfortable than before.
As you can see from this information, while the likelihood of selling your small business as a "business" is low, creative methods allow you to cash out, even for a small business.
It’s worth thinking about.
Note: At the time of writing this article, let’s recall the SME scale definitions according to KOSGEB in our beautiful country, Turkey:
- If your annual net revenue is between 0-10 million TL, you are a micro business.
- Between 10-100 million TL, you are a small business.
- Between 100-500 million TL, you are a medium-sized business.
- Above 500 million TL, you belong to the large business group.
We work to ensure you exit your business with prosperity and your pockets full.
Scale Your SME and Exit!