10 Considerations When Planning to Sell Your Business in Phoenix

A man in a suit is shaking hands with a man in front of a laptop computer.

Selling a business is a significant decision that requires careful planning and execution. For business owners in Phoenix who have decided to sell, several critical factors must be considered to ensure a smooth and profitable transaction. Whether you're selling due to retirement, pursuing new ventures, or cashing in on your hard work, preparing thoroughly will help you achieve the best results.


Here are the 10 important considerations when planning to sell your business in Phoenix.


1. Obtain a Professional Business Valuation

Before listing your business for sale, it's crucial to understand its true market value. A professional valuation gives you a clear and realistic idea of your business is worth, helping you set a competitive asking price. Overpricing can scare away potential buyers, while underpricing could mean leaving money on the table. Working with professionals like First Choice Business Brokers Phoenix can ensure an accurate valuation that reflects the business’s financial health and market potential.


2. Organize Financial Records

Clean, well-organized financial records are essential for attracting serious buyers. Prospective buyers will closely scrutinize your financial statements, tax returns, and balance sheets, so ensure that everything is accurate and up to date. Buyers will want to see the last 3 to 5 years of financial history to assess profitability and cash flow. Organized financials instill confidence and help speed up the due diligence process.


3. Prepare Legal Documents

In addition to financial documents, legal paperwork plays a significant role in the sale process. This includes business licenses, contracts with suppliers and clients, employee agreements, and leases. These readily available documents will reassure buyers that your business is operating smoothly and legally. Addressing any legal issues before the sale can prevent delays and complications later in the process.


4. Improve Operational Efficiency

Buyers are more attracted to businesses that are running smoothly and efficiently. Before listing your business, take steps to streamline operations, reduce unnecessary expenses, and eliminate inefficiencies. A well-organized and profitable business is more appealing to buyers, and it can also help you secure a higher sale price. Consider implementing technology solutions or delegating responsibilities to ensure that the business can operate without your daily involvement.


5. Understand Market Timing

Timing is crucial when selling a business. Understanding the current market conditions in Phoenix and your industry is important. The best time to sell is when your business performs well, and market demand is high. Seasonal trends may also influence the timing of your sale. For example, certain industries see increased buyer activity during specific times of the year. Consulting with experienced brokers like First Choice Business Brokers Phoenix can help you determine the optimal timing for your sale.


6. Prepare for Due Diligence

Once a buyer shows serious interest, they will conduct due diligence to verify the information you have provided. This process can include a deep dive into your financials, legal documents, and operational processes. Be prepared to answer detailed questions and provide documentation for everything from revenue and expenses to employee contracts and customer relationships. Having everything organized and ready for review will make the due diligence process smoother and faster.


7. Consider Seller Financing

Offering seller financing can attract more buyers, as it lowers the upfront financial commitment required from them. Seller financing also shows that you have confidence in the business’s continued success, which can make buyers more comfortable with the purchase. Structuring the deal with seller financing can also allow you to close the sale more quickly and potentially at a higher price.


8. Prepare Your Business for Transition

A smooth transition is key to ensuring the business's continued success after the sale. Buyers will want to know that they can take over without major disruptions. Create a detailed transition plan that includes training for the new owner, introductions to key clients and suppliers, and support for a specified period after the sale. A well-prepared transition plan makes the business more attractive to buyers and increases the likelihood of a successful sale.


9. Market Your Business Effectively

Marketing your business to the right audience is critical for attracting serious buyers. Work with professional brokers like First Choice Business Brokers Phoenix to create a marketing strategy highlighting your business’s strengths and potential for growth. A comprehensive marketing plan should include online listings, targeted advertising, and outreach to prospective buyers in your industry. Proper marketing ensures that your business reaches a wide pool of qualified buyers, increasing the chances of a successful sale.


10. Work with an Experienced Business Broker

Navigating the sale of a business is a complex process that requires expertise. Working with an experienced business broker can make the entire process more efficient and successful. First Choice Business Brokers Phoenix offers extensive experience in the Phoenix market, helping business owners price their businesses accurately, market effectively, and manage negotiations with potential buyers. A professional broker ensures you receive the best possible outcome from your sale, saving you time and avoiding potential pitfalls.


Conclusion

Selling your business in Phoenix requires careful consideration of many factors, from obtaining a professional valuation to organizing financials and ensuring a smooth transition for the new owner. By addressing these 10 key considerations, you can increase the likelihood of a successful sale and maximize the value of your business. Working with trusted professionals like First Choice Business Brokers Phoenix will provide you with the expertise and guidance you need to achieve your goals.

Get Free Business Valuation

or

Schedule Free Consultation

Recent articles for you

THE DANGER OF MARKET TIMING THE SALE OF YOUR BUSINESS

By Kim Santos • February 21, 2025
The other day I was speaking with a successful CEO in his fifties who runs a heating and air conditioning company generating eight million dollars in revenue and over one million dollars in profit before tax. Even though he was tired and nearing burnout, he was planning to wait another five to seven years before selling his business because he “wanted to sell at the peak of the next economic cycle.” On the surface, his rationale seems to make sense. If you speak with mergers and acquisitions professionals, they’ll tell you that an economic cycle can impact valuations by up to “two turns,” which means that a business selling for five times earnings at the peak of an economic cycle may go for as low as three times earnings at a low point in the economy. The problem is, when you sell your business, you have to do something with the money you receive, which usually means buying into another asset class that is being affected by the same economy. Let’s say, for example, you had a business generating $100,000 in pre-tax profit in an industry that trades between three times earnings and five times earnings, depending on the point in the economic cycle. Furthermore, let’s imagine you sat stealthy on the sideline until the economy reached the absolute peak and sold your business for $500,000 (five times your pre-tax profit) in October 2007. You took your $500,000 and bought into a Dow Jones index fund when it was trading above 14,000. Eighteen months later – after the Dow Jones had dropped to 6,547.05– you’d be left with less than half of your money. Even though you cleverly waited till the economic peak, by March 9, 2009, you would have effectively sold your business for less than 2.5 times earnings. The inverse is also true. Let’s say you waited “too long” and sold the same business in March 2009. And because you were at the lowest possible point in the economic cycle, you only got three times earnings: $300,000. Notice that’s 20% more than if you’d sold at the peak and bought an index fund at the top of the market. Just like when you sell your house in a good real estate market, unless you’re downsizing, you usually buy into an equally frothy market. Which is why timing the sale of your business on external economic cycles is usually a waste of energy. External vs. internal economic cycles Instead, I’d recommend timing the sale of your business when internal economic factors are all pointing in the right direction: employees are happy, revenue and profits are on an upward trend, and there is still lots of market share for an acquirer to capture. When internal economic factors are pointing up, you’ll fetch a price at the top end of what the market is paying for businesses like yours right now, which means that – for good or bad – you get to use your newfound cash and buy into the same economic market you’re selling out of.

WHAT YOUR BIRTH CERTIFICATE SAYS ABOUT YOUR EXIT PLAN

By Kim Santos • February 20, 2025
In our experience, your age has a big effect on your attitude towards your business and how you feel about one day getting out. Here's what we have found: Business owners between 25 and 46 years old Twenty- and thirty-something business owners grew up in an age where job security did not exist. They watched as their parents got downsized or packaged off into early retirement, and that caused a somewhat jaded attitude towards the role of a business in society. Business owners in their 20’s and 30’s generally see their companies as means to an end and most expect to sell in the next five to ten years. Similar to their employed classmates who have a new job every three to five years; business owners in this age group often expect to start a few companies in their lifetime. Business owners between 47 and 65 years old Baby Boomers came of age in a time where the social contract between company and employee was sacrosanct. An employee agreed to be loyal to the company, and in return, the company agreed to provide a decent living and a pension for a few golden years. Many of the business owners we speak with in this generation think of their company as more than a profit center. They see their business as part of a community and, by extension, themselves as a community leader. To many boomers, the idea of selling their company feels like selling out their employees and their community, which is why so many CEO’s in their fifties and sixties are torn. They know they need to sell to fund their retirement, but they agonize over where that will leave their loyal employees. Business owners who are 65+ Older business owners grew up in a time when hobbies were impractical or discouraged. You went to work while your wife tended to the kids (today, more than half of businesses are started by women, but those were different times), you ate dinner, you watched the news and you went to bed. With few hobbies and nothing other than work to define them, business owners in their late sixties, seventies and eighties feel lost without their business, which is why so many refuse to sell or experience depression after they do. Of course, there will always be exceptions to general rules of thumb but we have found that – more than your industry, nationality, marital status or educational background – your birth certificate defines your exit plan.

SEVEN POWERFUL RATIOS TO START TRACKING NOW

By Kim Santos • February 19, 2025
Doctors in the developing world measure their progress not by the aggregate number of children who die in childbirth but by the infant mortality rate, a ratio of the number of births to deaths. Similarly, baseball’s leadoff batters measure their “on-base percentage” – the number of times they get on base as a percentage of the number of times they get the chance to try. Acquirers also like tracking ratios and the more ratios you can provide a potential buyer, the more comfortable they will get with the idea of buying your business. Better than the blunt measuring stick of an aggregate number, a ratio expresses the relationship between two numbers, which gives them their power. If you’re planning to sell your company one day, here’s a list of seven ratios to start tracking in your business now: 1. Employees per square foot By calculating the number of square feet of office space you rent and dividing it by the number of employees you have, you can judge how efficiently you have designed your space. Commercial real estate agents use a general rule of 175–250 square feet of usable office space per employee. 2. Ratio of promoters and detractors Fred Reichheld and his colleagues at Bain & Company and Satmetrix, developed the Net Promoter Score® methodology, which is based around asking customers a single question that is predictive of both repurchase and referral. Here’s how it works: survey your customers and ask them the question “On a scale of 0 to 10, how likely are you to recommend to a friend or colleague?” Figure out what percentage of the people surveyed give you a 9 or 10 and label that your ratio of “promoters.” Calculate your ratio of detractors by figuring out the percentage of people surveyed who gave you a 0–6 score. Then calculate your Net Promoter Score by subtracting your percentage of detractors from your percentage of promoters. The average company in the United States has a Net Promoter Score of between 10 and 15 percent. According to Satmetrix’s 2011 study, the U.S. companies with the highest Net Promoter Score are: USAA Banking 87% Trader Joe’s 82% Wegmans 78% USAA Homeowner’s Insurance 78% Costco 77% USAA Auto Insurance 73% Apple 72% Publix 72% Amazon.com 70% Kohl’s 70% 3. Sales per square foot By measuring your annual sales per square foot, you can get a sense of how efficiently you are translating your real estate into sales. Most industry associations have a benchmark. For example, annual sales per square foot for a respectable retailer might be $300. With real estate usually ranking just behind payroll as a business’s largest expenses, the more sales you can generate per square foot of real estate, the more profitable you are likely to be. Specialty food retailer Trader Joe’s ranks among companies with the highest sales per square foot; Business Week estimates it at $1,750 – more than double that of Whole Foods. 4. Revenue per employee Payroll is the number-one expense of most businesses, which explains why maximizing your revenue per employee can translate quickly to the bottom line. In a 2010 report, Business Insider estimated that Craigslist enjoys one of the highest revenue-per-employee ratios, at $3,300,000 per employee, followed by Google at $1,190,000 per bum in a seat. Amazon was at $1,010,000, Facebook at $920,000, and eBay rounded out the top five at $530,000. More traditional people-dependent companies may struggle to surpass $100,000 per employee. 5. Customers per account manager How many customers do you ask your account managers to manage? Finding a balance can be tricky. Some bankers are forced to juggle more than 400 accounts and therefore do not know each of their customers, whereas some high-end wealth managers may have just 50 clients to stay in contact with. It’s hard to say what the right ratio is because it is so highly dependent on your industry. Slowly increase your ratio of customers per account manager until you see the first signs of deterioration (slowing sales, drop in customer satisfaction). That’s when you know you have probably pushed it a little too far. 6. Prospects per visitor What proportion of your website’s visitors “opt in” by giving you permission to e-mail them in the future? Dr. Karl Blanks and Ben Jesson are the cofounders of Conversion Rate Experts, which advises companies like Google, Apple and Sony how to convert more of their website traffic into customers. Dr. Blanks and Mr. Jesson state that there is no such thing as a typical opt-in rate, because so much depends on the source of traffic. They recommend that rather than benchmarking yourself against a competitor, you benchmark against yourself by carrying out tests to beat your site’s current opt-in rate. Dr. Blanks and Mr. Jesson suggest the easiest way of increasing opt-in rate is to reward visitors for submitting their e-mail addresses by offering them a gift they’d find valuable. Information products – such as online white papers, videos and calculators – make ideal gifts, because their cost per unit can be almost zero. Using this technique and a few others, Conversion Rate Experts achieved a 66 percent increase in the prospects-per-visitor rate for SOS Worldwide, a broker of office space. 7. Prospects to customers Similar to prospects per visitor, another metric to keep an eye on is the efficiency with which you convert prospects – people who have opted in or expressed an interest in what you sell – into customers. Conversion Rate Experts’ Dr. Blanks and Mr. Jesson recommend you monitor the rate at which you are converting qualified prospects into customers, and then carry out tests to identify factors that improve that ratio. Conversion Rate Experts more than doubled the revenues of SEOBook.com , the leading community for search marketers, by converting many of SEOBook’s free subscribers into customers. Techniques that were found to be effective included (perhaps counter intuitively) restricting the number of places available; allowing easier comparison between SEOBook and the alternatives; communicating the company’s value proposition more effectively; and simplifying its sign-up process. The trick is to establish your benchmark and tinker until you can improve it. Acquirers have a healthy appetite for data. The more data you can give them – in the ratio format they’re used to examining – the more attractive your business will be in their eyes.
Share by: