4 Steps To Selling Your Business For $1 Million

Did you know that you could bank off of selling your business? Find out how you can prepare your business to be bought for a million here!

CNN Money highlights…

You rarely make a fortune from running your own business. Most entrepreneurs take just enough out of profits to provide a livable income, plowing the rest back into the enterprise to keep it growing.

Instead, the big payoff comes if and when you sell: A sampler of median sales prices from the online marketplace BizBuySell shows that the typical restaurant went for about $125,000 last year, pet-care shops sold for $215,000, communications firms commanded around $700,000, while software companies got a cool $1.3 million.

A few smart moves early on can help push your eventual selling price into seven figures too.

KEY MOVE: Hone your exit strategy from day one.

HOW TO GET THERE

Make it easy to pass the reins.Your venture will have greater intrinsic value if its success does not hinge on one person.

“If a business is all about me as an individual, no one will want to buy it,” says Michael Eckton, managing partner of Crestwood Advisors, a Boston wealth-management firm that counsels many entrepreneurs.

For starters, don’t name the company after yourself. And don’t handle every aspect of the business by yourself.

Create a map for success. As you arrive at business systems that work well, write them down so that you can hand a how-to manual to your successor.

“You want it to be so idiot-proof that you could pull out your employees, replace them with someone else, and the process would still get done the right way,” advises John Warrillow, author of “Built to Sell.”

Diversify revenue streams. Buyers tend to pay more for a business that generates sales from subscriptions and service contracts than for one in which each dollar comes from selling something new.

Also off-putting: if revenues are heavily dependent on one or two key customers. “Instead of selling lots of stuff to a few people, you’re better off selling one thing to a lot of people,” Warrillow says.

Spruce up your digital presence. Your website is the first place buyers look, so avoid common pitfalls, like a dated design or unclear navigation.

Before selling, also eliminate unnecessary expenses from your books that may detract value — say, having your son, who worked for you in the summer, listed on the payroll.

Get the entire story at CNN Money!