Top 5 Tips When Selling Your Business
You might know your company inside and out but not know how to start when you decide to sell your business. Not to worry. Here are the top 5 tips when selling your business that could help you avoid making mistakes or having regrets later. After all the years of work you put into your company, you want to get a fair price.
A Maryland business attorney can help you navigate the steps of preparing your company to sell, negotiate the terms, and complete the sale.
Getting Your Company Ready to Put on the Market
The U.S. Chamber of Commerce offers suggestions for people who want to sell the small business, including things you will want to consider to get the best sales price. The Chamber suggests starting this process at least a year before you would like to sell your business.
A real estate agent would tell you to spruce up your home with a fresh coat of paint and to remove clutter to attract buyers. A similar approach could apply to your company. You might be able to increase the value of your business by “decluttering” your company.
For example:
Clean up those loose ends that get shoved to the back burner to deal with another day. That day is today. Your purchaser does not want to deal with annoying little issues that never got addressed.
If you plan to sell your company as a going concern and your buyer is likely going to want your key employees to remain on board, consider the employment contracts of those individuals and offer incentives for them to stay with the company.
Talk with your business tax advisor about how to structure your business and the sale to minimize the tax impacts of the sale.
Have your accountant perform an audit of your company’s financial statements. Prospective buyers will want to see these, so you will want them ready to present to candidates.
Talk with a lawyer about your company’s intellectual property rights to make sure these rights get protected in the sale.
Depending on your situation, there could be additional steps you need to take to get your business ready to put on the market for the top dollar.
Keep Your Business Strong and Healthy
You might have checked out of the company emotionally, but you will not get the best sales terms if you now neglect the day-to-day operations. Even after you hook an interested buyer, they might want to renegotiate the sales price if the value of your company plummets shortly before closing the sale. Make sure you have people working as hard as ever at your end to keep the company thriving.
How to Determine the Value of Your Business
You will want to work with a professional business appraiser to perform the business valuation. These professionals are usually CPAs with advanced training in business valuation. A potential buyer will likely be skeptical about a business valuation prepared by you, even if you have the requisite credentials or your CFO or company accountant.
A business valuation report with substantial exhibits and documentation will be more credible when performed by an unbiased third party with a stellar reputation in the business community. These valuations are expensive but worth the cost.
Your Exit Strategy
After years of building your company, it is not simple to walk away one day and not return, like quitting a job. You need to know where you will go and what you will do after the sale of the business. Ensure you have the financial means to enjoy life after the transaction.
If you consult with the right experts, you should have a firm grasp on how much money you will have after paying the taxes on the sale of your business. Prepare a personal cash flow statement and pay down as much of your personal debt as possible before selling your company. There are more possibilities now than ever before for creating income streams in retirement or in your next chapter if you are not ready to retire yet.
Ensure you have a Plan A, Plan B, and Plan C.
Anticipate What Your Potential Buyers Will Want to Know
You would not walk into a shareholders’ meeting, job interview, or meet-up with potential investors without first thinking about the questions they are likely to ask and formulating your responses.
Think about and have answers ready for questions like these:
Why are you selling the company?
Who is your main competition?
Will your employees stay on after the sale of the business?
What will you do after the transaction?
There will likely be additional questions focused on pertinent issues within your industry. Being confident and prepared could cause your company to command a higher selling price. A Maryland business attorney could help you prepare for those questions and guide you through the sales process.
