BusinessHABBusiness to business sales: Whether you’re setting up a business plan to present to a bank or investors or you’re just punching a line item on your To Do list, sales projections can be a valuable management tool if done right. When you project sales and follow through by comparing actual figures to the forecast, you more accurately gauge what’s going on in your business and more quickly make course corrections as needed. Follow the steps in this article to accurately project sales for your business.
Selling a small business is a complex venture that involves several considerations. It can require that you enlist a broker, accountant, and/or an attorney as you proceed. Whether you profit will depend on the reason for the sale, the timing of the sale, the strength of the business’s operation, and its structure.
The business sale will also require much of your time and, once the business is sold, you’ll need to determine some smart ways to handle the profit.
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Tips to Strategies Business to Business Sales
1. Start with expenses.
- Consider fixed and variable expenses, from rents and fixed loans to payroll and utilities, plus capital equipment and inventory, as well as a marketing or advertising budget.
- Allow for bad debt or returns and a profit margin.
2. Factor in income sources.
- Any business, whether product or service, will have units to measure, even if it’s time itself (such as professionals billing by the quarter hour).
3. Review past sales figures to determine the cycle your business operates in: its ebb and flow.
- For example, most retail establishments can run in the red during summer vacation and make the bulk of their income during the holidays.
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Tips to Strategies Business to Business Sales
4. Divide income by expenses to arrive at a baseline sales price.
- To manage your business going forward, tie this sales price back to the income units, such as by product type or by seasonality, so you can compare future figures to past sales.
5. Compare the average sales per square foot for your store to stores like yours.
- Compare stores of similar size, in a similar industry, in a similar locale.
6. Create a target zone around your business and estimate the total number of consumers using or needing your product or service within each zone (for example, within 1 mile (1.6 km), 5 miles (8.0 km), 10 miles).
- Determine market share. Which businesses do consumers patronize for your product or service? What percentage do you get compared to competitors?
7. Use your unit breakdown and weight the per-unit figure by overall sales.
- For example: you sell five item categories total. 1 category sells 5 units per day, 2 sell 3 units each, and 2 sell 1 unit each. Multiply the price of each unit by the number sold for a total current revenue figure.
8. Decide how best to promote your products and services, and estimate the number of customers you anticipate reaching.
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Tips to Strategies Business to Business Sales
9. List how you plan to grow your business.
- Options include selling more current products to existing customers, attracting more customers with current products and introducing new products to current or prospective customers.
10. Review past marketing approaches to see which yielded the best results.
- How well do these promotions match your current product and customer mix? Can you replicate the promotions? Do different promotions promote sales to different customer groups, or move different product categories?
Tips to Strategies Business to Business Sales
13. Run this equation several times: by product category, by customer type, by the anticipated outcome of promotions.
- The more meticulous you have been in breaking down your business, the more accurately you can project sales.
14. Compare your figures against industry norms.
- Ask a business associate or mentor to look over your figures.
- Look up forecasts from within the industry, often published in trade magazines.
- Peruse an annual report of a competitor or a business of similar size in your area.
- Check out sample plans your banker, Chamber of Commerce, or Small Business Administration office may make available.
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Tips to Strategies Business to Business Sales
15. Handling the Profits
Take some time—at least a few months—before spending the profits from the sale. Create a plan outlining your financial goals, and learn about any tax consequences associated with the sudden wealth. Speak with a financial professional to determine how you want to invest the money and focus on long-term benefits, such as getting out of debt and saving for retirement.
16. How Do You Sell a Small Business Without a Broker?
While many people would like to avoid the 10% a business broker may charge, the risks of selling on your own may outweigh the loss of money. But if you’re going to go it alone, prioritize selling to a buyer you know, make use of the advice of experienced, retired owners and executives, and use all the internet resources available, such as the Small Business Administration, or the National Federation of Independent Business (NFIB).
Tips to Strategies Business to Business Sales
17. How Do You Sell a Business Idea?
It’s possible to approach a company with a business idea, but first, you need to do your research, prepare a presentation, and research and approach potential targets. While some business plans are best protected with a patent, others can be secured by getting a potential company you want to work with to agree to a non-disclosure agreement.
18. What Are the Steps for Valuing a Business for Sale?
To value your business, you can turn to a professional business evaluator for an objective estimate of the value of the business. You can also determine value by determining the market capitalization, looking at earnings multipliers, book value, or other metrics.
19. How Much Does It Cost to Sell a Business?
If you go through a business broker, and your business is under $1 million, the broker’s commission is likely 10% to 12%. Other fees that can crop up include attorney fees, marketing fees, the costs of making any cosmetic or more substantial upgrades to your business so as to make it more sellable. There are also fees that may come up if you are transferring a lease to the new owner of your business.
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Tips to Strategies Business to Business Sales
20. How Do You Sell a Business to a Competitor?
The process of selling to a competitor would involve the same steps as selling to a company that is not a competitor.
21. How Do You Sell a Business Online?
Selling a business involves negotiations, discussions, and a lot of leg work. If it’s not possible for all this to occur in person, then certainly using services like Zoom or Skype to hold business meetings with potential buyers digitally is possible.
22. How Do You Sell a Business Quickly?
Even if you are selling to a close family member or employee, rushing through the sales process is not advised. However, if a relatively quick turnaround is needed, hire a business broker to speed up the proceedings.
23. How Do You Sell a Franchise Business?
You’ll need to work in conjunction with your franchiser, as they will need to determine if the new buyer is appropriate. Plus, that new buyer will need to sign a franchise agreement with the franchiser.4 There are a variety of fees and rules associated with owning or selling a franchise that can be found in the FTC’s compliance guide.
Tips to Strategies Business to Business Sales
24. How Do You Sell Your Share of a Business?
Selling your share of a business to your other partners or partner is a common ownership transfer method, particularly for small businesses. Having an agreement in place with your partners ahead of the sale will help smooth the transition, increasing the likelihood that both the staying and exiting partners benefit.
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Conclusion
Selling a business is time-consuming and for many people, it’s an emotional venture. A good reason to sell or the existence of a “hot” market can ease the burden, as can the help of professionals.
It may also be possible to receive free counseling from organizations such as SCORE, and your local chamber of commerce may offer relevant seminars and workshops. When all is said and done, the large sum of money in your bank account and your newfound free time will make the grueling process seem worthwhile.
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