The Best Advice For Selling A Business
Putting a small business up for sale can be complicated, and there are many different factors that must be considered as you proceed. It’s likely that you’ll need to hire a lawyer, an accountant, and even a broker during the proceedings. Will you see a profit? That will largely be dependent on factors such as the time of the sale, the reason behind the sale, and how strong the business and its structure is.
Selling a business can take up quite a bit of time. Even after the sale is completed, you’ll need to spend time determining how to use your profits.
If you keep these seven considerations in mind, you’ll be able to develop a strong sales plans, which means you’ll be more likely to have successful negotiations.
- Why Is the Business Being Sold?
If you’ve made the decision to sell your business, there’s a reason for that. If someone is considering buying your business, it’s likely that they will ask you that before anything else.
There are many reasons a business may be sold according to the legal advisors at Net Lawman, these include:
- Business owners choosing to retire
- Disputes between business partners
- Death or illness
- Too much work
- Feelings of boredom
While an owner may choose to sell a business because it isn’t currently profitable, this can make it difficult to find a buyer. Think about how saleable a business is. Make sure the timing is right and the business is ready to be sold.
There are a number of ways to make a business more appealing to potential buyers, such as:
- Boosting profits
- Showing consistent income
- Building a steady customer base
- Signing a contract that lasts a few years or more
- How Should You Time A Sale?
You should start prepping for the sale as soon as you possibly can. Ideally, you should start getting ready at least a year in advance. If you take time to prepare, you’ll have the chance to build a stronger customer base, strengthen your business structure, and make improvements to financial records. This will not only make your business more profitable, but it will allow the buyer to have a smoother transition.
- How Can You Determine The Worth Of Your Business?
Your next step should be to determine the value of your business. This will allow you to set an appropriate price. You should work with a business appraise and have them provide you with a valuation. When you work with an appraiser, you will receive a document that explains what your business is worth in detail. Not only can you use this to set an appropriate price for your business, but it can help you in negotiations.
- Is It Smart To Work With A Broker?
If you sell your business on your own, you won’t have to pay a commission to a broker. This means you could spend less overall. If you’re selling to someone you trust, such as a member of your family or an employee, doing things yourself is an excellent option.
However, working with a broker can save you time, which means you’ll be able to use that time to keep that business running smoothly. Brokers want to maximize the commission they receive, which means they will fight to sell a business for a higher price. Working with a broker can also be beneficial if you don’t want the sale to get attention. If you do choose to work with a broker, you’ll want to make sure that you talk about advertisements and your expectations beforehand. You should also ensure that you maintain a steady line of communication.
- How Can You Get Documents Ready?
You should collect tax returns and other financial statements from the last three to four years. Go over these statements along with an accountant. As you do this, you should put together a list of all equipment that will be included in the sale of the business. You should also build a contact list and gather all essential paperwork, such as the current lease for your building. Make sure you have copies of all of your documents so that you are able to distribute them to buyers that qualify.
This document package also should include a summary that describes the operation of the business. Ensure that your business looks presentable. If you have broken-down equipment or areas that need repairs, this is something that needs to be addressed before the sale.
- How Can You Find A Buyer?
It isn’t always easy to locate the right buyer. If your advertising is broader, it’s more likely that you’ll be able to find a buyer.
After you’ve located potential buyers, you can do this to keep the process running smoothly:
Locate multiple potential buyers in the case a deal falls through
Maintain content with prospective buyers
Determine whether or not a prospective buyer qualifies for financing before you hand out information related to your business
If you intend to use financing, have an attorney an or accountant help you come to an agreement with your buyer
Find room for negotiation, but ensure that the price you’ve set is appropriate and fair. Take the future worth of the company into consideration
Make sure that all agreements are in writing. To ensure that your information is protected, you should have prospective buyers sign a confidentiality agreement.
Make sure that the signed agreement goes into escrow if possible.
You may see these documents following a sale:
A bill of sale, which will transfer the assets of a business to a buyer
Assigning a lease
Security agreements, which allows the seller to keep a lien on the business
A buyer may also request that you sign a non-compete agreement, which means you will agree not to start a new business that will compete with the one they have purchased from you.
- How Should You Handle The Profits?
Don’t spend the profits from a sale immediately. Instead, give yourself a few months to find the best way to use these funds. Learn about what you’ll be paying on taxes. Set financial goals. Talk to a financial advisor so that you can find the wisest way to use these funds. Try to take a long-term approach and consider the future.