The idea of selling your creative business may seem completely crazy. Maybe you left a corporate job to start your business or maybe it’s been a dream that’s years in the making. You have passion for your business, and your soul is in every detail.
This is exactly how I felt about my first business. I started and ran a wedding blog for five years, and boy, did I love that thing. The first two years all I thought about was blog posts, SEO, photo shoots and advertisers. I can’t remember what I ate for breakfast this morning, but I will never forget the day I realized that I was making as much on my blog as I was at my 9–5 job. I poured my heart and soul into every single post, and it always rewarded me for my efforts.
As life moved on and I got busier, the passion for my business waned. I still loved my blog but it was not as easy to put the time in, and as it grew it needed more and more from me. I never considered selling until someone suggested it, and I was a little shocked. Even though I had two employees and was making a solid full time salary, I couldn’t imagine who would want to buy my small little passion project. The business was so much a part of me, it also totally freaked me out to think what I would do if I sold it.
These thoughts filled my mind for a few months until I decided that I had nothing to lose in exploring the idea. I started researching and found out that my business was more valuable than I imagined. The idea that someone would actually pay me what I thought it was worth, was just the push I needed (also, let’s be honest, there is something mighty appealing about a chunk of cash!). Three months later I was driving a big ol’ check to the bank. And guess what? I haven’t regretted it for a minute.
This is why I am passionate about the fact that every entrepreneur should set up their business with the option of being sold. Even if you can’t imagine that you would ever make that call, it’s important to have an exit strategy, just in case. Don’t just take my word for it, though, just look at the most successful entrepreneurs in the world — this is exactly what they do.
Maybe you think this all sounds great for someone else, but you don’t know who would want to buy your tiny company or how you would even start that process. Guess what? If you’re making money, your business is valuable! So let’s explore the FAQs of selling your business.
First things first, can your business be sold?
Most businesses can be sold, but there are a couple factors that might make it more difficult. If the name of your company is your personal name, you may have trouble finding a buyer because it’s so directly tied to you. Of course, this can be fixed with a rebrand, but it is something you’ll likely need to change before you sell.
Another important question is whether you’re actually making money or not. It’s going to be pretty hard to sell a business that’s not generating a consistent income. Before you try to sell you need to have a good pipeline of clients or a regular sales flow to attract a potential buyer.
When should I sell?
This is one of the most important questions to ask. Sell your business too soon and you’ll lose money, sell too late and you could also lose money. So when is that magic moment? You should ask a business advisor or broker, but a good rule of thumb is to have at least two to three years of tax returns showing growth and profitability. The more years you show growth, the more you’ll likely get for your business.
On the other hand, you shouldn’t wait until sales are declining to sell. Sell when you’re at the top of your game and momentum is in your favor. This can be tricky because the moment your business is worth the most might be just as you’re starting to see your hard work pay off.
Do you have solid systems in place?
As creative entrepreneurs we tend to be very central in our businesses, but if you’re interested in selling, you have to show that the business can function without you. This is where it is important to have good systems and documentation in place. What does the sales process look like? How do you do your taxes? How do you bring on new clients and manage projects? Of course there will be training and a handover period, but having streamlined systems for yourself and your employees will make your business far more appealing to a buyer.
If you don’t have these things in place, it’s not too late to get them up and running. The longer you have a well run business the more valuable it will be!
Do you have any secrets?
Having someone examine your business is a bit like having someone come in and go through your bathroom. It’s very invasive and they are bound to find some pretty darn personal items. Prepare to sell your business like you would if your mother-in-law was coming over to go through your bathroom with a fine tooth comb; buy some drawer organizers, throw away the nasty old razor in your shower and take out the trash to make things look extra spick and span.
This is where your accountant can help. Sit down with them before you sell and go through your tax returns, take a look at your expenses, your income and have an itemized list of these for the last 24 months. The numbers will make or break the sale, so make sure you have them organized and readily available.
How much is my business worth?
The question you’re all wondering! The short answer: it depends. The long answer? What your business is worth depends on your industry, its profitability and what someone would think it’s worth. The general rule is that a business is worth a multiple of what the total income is in a year, the most common figure is two times, plus any assets the business might have. This is not standard, however, and differs greatly from industry to industry. You also have to take into consideration expenses, salaries and whether the new owner would have to hire someone to run the business or whether they would run it themselves.
Confused? I was too, which is why I consulted with a broker and business advisor first to help me come up with a good figure. Be sure to get more than one opinion, though, and make sure whoever you are talking to understands your industry specifically. I had one broker tell me my business was worth $47,000 less than I ended up selling it for! I was very glad I got two other opinions.
How do I find a buyer?
You have two main options for finding a buyer. You can hire a broker or you can try and find one yourself. Originally, I met with a broker. I didn’t end up using him, but he was invaluable to the process and helped me determine all the right steps. He was a super nice guy who just decided to help me out (probably because my business was so small compared to the millionaires he was used to!). Brokers take around 10% of the sale price, which might be worth it in your case if they have access to the right buyers. No matter what you decide, I think starting with a broker is a good thing to do, even if you just hire them as a consultant.
I literally had no idea where to find a buyer, but early on I received some great advice. Someone told me that the best place to start was within my own network, so I contacted two people I already knew. The first was a big media company in my city who said they weren’t interested. The second was someone who worked in weddings that randomly popped into my head. I contacted her, we met for coffee and then two months later I was signing papers at the lawyer’s office. I don’t know if this is a standard turnaround time, but the moral of the story is to search your network before anything else.
If you do approach someone, have them sign a confidentiality agreement to protect yourself and your business.
How do I know if I am ready to sell?
When I decided to sell my business, I knew I had taken it as far as I wanted to. I could see there was growth left, but my heart was not there anymore. I also knew that it was at the top of its game. I wasn’t sure how long it had left and I knew I wasn’t the right person to take it further. It was a hard decision, but honestly, I have never regretted it and I am so happy with my choice.
For us creatives, our businesses become one with us and the decision to sell can be a scary one. You can consult all the business advisors in the world, but the decision to sell has to be yours. Part of being an entrepreneur is making wise decisions for the future, so even if you weigh it all up and decide you don’t want to sell, it’s still smart to think through your exit strategy. You just never know when you’ll be ready to put up that for sale sign!
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