There are few things in life that can rival the joy and satisfaction that one feels from being able to build a successful business. While the meaning of success will differ from one business owner to the next, the use of success in this context is the universal description that means being proud of a business that you built from the ground up into a profitable and healthy entity.
On the flip side of that coin, in the same way that people often mourn the loss of something that they hold dear, chances are you will “mourn” the loss of your business if a time comes when you need to sell it.
The reasons for wanting or needing to sell your business will vary but they can range from parting ways with your business partner, a divorce from your spouse, a health challenge that you are facing, retirement, or a whole host of other reasons.
Whatever the reason is, once the decision has been made to sell your business, the next question that naturally arises is how best to go about it. A good starting place would be to seek expert advice and guidance from a professional who is skilled and experienced in these matters, like a business lawyer.
A business lawyer will, for instance, give you a general overview of the entire process of selling a business from beginning to end. These things include whether to structure the deal as a stock sale or an asset sale, the benefits or disadvantages of using a broker, any lease assignment that might need to take place, and much more.
Business advisers or coaches will often tell you that when starting out in business it is a good idea to start thinking about an exit strategy as early as possible. Selling your business is just one of the options to consider. While for the vast majority of people the thought of selling their business will not be their most immediate concern during the early stages, a time may come when they may need to give serious thought to it for the best interests of the business and its owner.
Things to Keep in Mind When Selling Your Business
Besides the decision to start a business, the decision to sell it is probably the most important you can make as an entrepreneur. Once you have decided to sell your business, there are certain things to keep in mind before you swing into action.
Timing is Everything (Usually)
A really important part of selling your business is timing. Understanding where your business is at every point in time is crucial. Also, understanding your market is key because there are times when certain markets are hot and that is usually the best time to sell. This can often be the difference between getting a high offer or none at all.
Have a Solid Plan in Place
When starting your business you likely had a business plan in place. In the same way, you should create a solid plan for selling your business. A savvy buyer will want to know why you are selling your business and several other important pieces of information, including finances. The fact is, deciding to sell your business will make most buyers suspicious. Having a written plan will help explain your decision to potential buyers which can help alleviate those concerns.
Get Your Tax and Estate Plan in Place
Once you have your sale plan, the next step is to get in touch with a good estate attorney and/or an accountant. You would do this so that they can look into the tax and estate implications for you and your business when it eventually sells. It is important to put a tax and estate plan in place before you start shopping around for buyers as certain information that you come across in this process can influence certain decisions that you make around selling.
For instance, if the transaction is to happen as an asset sale instead of as a stock sale, there will likely be implications from an accounting and tax perspective as each asset being sold will be taxed at the appropriate rate. Additionally, if the buyer of the business forms an LLC, for instance, for the purpose of the transaction the reporting will likely be different from that to be done if sold to an individual person.
Get Your Business Valued
Next, get your business valued. This is an important step in your journey to selling your business because it will determine how much you get for your business. This is not always an easy thing to do because emotions are often involved. However, a fair valuation has more to do with logic and facts than with emotions. This is where a professional valuation service will come in handy here.
Engage a Mergers and Acquisitions (M&A) Lawyer
Depending on the size of the business being sold and the complexity of the transaction, an M&A lawyer might be required for the transaction. Such a resource is more likely to be needed for larger businesses and/or more complex transactions that have many moving parts, therefore, choosing the right one is very important to ensure that you are both the right fit for each other.
Get the Right Broker
It is possible to work with the wrong broker, which is why business owners should take the time to identify the right person to represent their business. Working with a broker can be helpful because brokers often have access to a large network of other business owners, many of whom could be potential buyers of your business. Also, it helps to get a broker who understands your industry, your business, and also has a realistic outlook about selling your business.
Close the Deal
Once negotiations are over and both the seller and buyer have agreed to the terms of sale, the next step is to close the deal. This is done with a Purchase Agreement and other relevant contracts that would have been drawn up by an experienced business attorney.
It goes without saying that you must do your due diligence concerning the sale of your business, in the same way that the potential buyer will do theirs. One of the worst things that can happen to an entrepreneur is selling off your business to the wrong buyer. What your objectives are for selling the business, or the reason for the sale, will go a long way in shaping how you treat selling the business.
If your main objective is mainly to cash out and get the highest possible payout, then this is what you will obviously be looking out for. If, on the other hand, you are more interested in someone who will continue to run the company properly, perhaps take it to even greater heights than you have, then you are more likely to want to do in-depth due diligence on the capabilities of the would-be buyer to try and determine how well they will be able to achieve this goal.
Finally, it is important to note that businesses are not sold overnight. Typically, it can sometimes take several months to get a business sold. So, patience is key.
- Selling Your Business? Here are 7 Things to Keep in Mind - August 14, 2021