Whether you profit will depend on the reason for the sale, the timing of the sale, the value of the business and how you go about the sales process. The business sale will also require much of your time and, once the business is sold, you’ll need to determine what to do with the profit.
So the question now is, should you sell your business?
Here are some vital topics to help you build a solid plan and make the negotiations around the sale of your business a success.
Prepare Documents In Advance
It takes time and effort to prepare for the sale of a business, Don’t think you can start putting things together the month before you sell.
Selling a business requires an understanding of the value and worth of the business. Gather your financial statements and tax returns from as far back as possible and review them with an accountant.
Having clear books and records helps a buyer with due diligence, so make sure you can produce a number of years’ of tax returns that are accurate and show maximum profitability, so you can get the best price for your business.
Develop lists of equipment and stock that are being sold with the business, as well as of contacts related to sales transactions and supplies, and have all relevant paperwork, such as your property lease or title documents, ready.
Find Out the Value Of Your Business
Even if you have a rough idea of what your business is worth, this is only a number to guide you in your consideration. You’ll still need to get an accurate valuation to make sure you don’t price it too high or too low.
Contact a business appraiser to get a valuation. The appraiser will draw up a detailed explanation of the business’s worth. This document will bring credibility to the asking price and can serve as a gauge for your listing price.
You may need multiple valuations depending on the nature of the business, the potential buyer(s) and the deal that is being proposed.
Find A Right Buyer
The sale of a business may take many months – in some cases even years – as finding the right buyer can often be a challenge. However, once you have prospective buyers, keep the process moving along:
i. Get two to three potential buyers just in case the initial deal falters.
ii. Stay in contact with the potential buyers.
iii. Allow some room to negotiate, but stand firm on a price that is reasonable and aligned to the true worth of the business.
iv. Put any agreements in writing. Potential buyers should sign a non-disclosure / confidentiality agreement to protect your information.
v. The buyer may also require you to sign a non-compete agreement, in which you agree to not start a new, competing business that would entice your former customers away from your old business.
Always Go With a Professional Team
It’s important to figure out who you need on your team to help you through the sales process and ensure you get the best price for your business.
You’ll likely need an accountant, an appraiser, an attorney, and a business broker. You’ll also need a personal accountant and attorney to help you with your personal financial planning once you receive the proceeds from the sale of your business.
A broker is especially valuable in the latter stages of the sales process to help with negotiation, due diligence, and the final sale. Granted, selling the business yourself allows you to save money and avoid paying a broker’s commission. And a self-sale is also the best route when the sale is to a trusted family member or current employee. However, in other circumstances, a broker can help free up time for you to keep the business up and running, keep the sale quiet and get the highest price.
Your lawyer will be able to discuss with you the legal implications and advise you on these before you sign the sale agreement. Your lawyer will incorporate proper clauses into the agreement to safeguard your contractual rights and carry out due diligence to ensure that your risk is mitigated to the lowest level possible.