General Steps to Takes While Preparing to Sell Your Business
Selling your company at the proper time can provide you with greater freedom and added income as you pursue other business or personal goals. Whether you’re a sole proprietor who can move forward alone -- or someone who must confer with business partners or a corporate board of directors, there are basic steps you can follow that can help streamline the process.
As you further contemplate this move, give serious thought to timing and be ready to explain why you’re making specific choices to prospective buyers; They’re sure to ask why you’re selling your company now. Also think about whether you should hire a professional business broker, especially if you don’t want to manage the sale on your own and are concerned about locating the best potential buyers.
Each of these key topics are discussed further below.
Are you prepared to tell qualified buyers why you want to sell your business now?
If sales are dropping or you’re currently losing a sizable portion of your customer base, you may want to postpone the sale for six months or a year. During that time, you may be able to rebuild the company and make it more viable.
Of course, business owners often want to sell their companies for many other reasons, including the following ones.
They’re eager to retire and simplify their lives – letting go of business activities.
They have current disputes with partners, co-owners or corporate board members, so they would just like to move on. Obviously, you’ll need to reference these issues in a very tactful yet honest manner if you have no other reasons for selling.
The sole owner (or another party) is facing a serious illness or impending death.
You want to keep working -- but in a less stressful capacity. Be ready to share this in as upbeat a manner as possible – while being open and honest about the pressures of running the business.
You’ve developed a keen interest in a different business field and are eager to get your new venture up and running.
These are just a few of the reasons why people often choose to sell a business. Whatever you decide to tell prospective buyers – be as honest as possible since a failure to disclose current problems is unethical and could damage your reputation in the community.
If your business is losing value, be prepared to tell potential buyers (after carefully qualifying them) how they might reverse that trend. You can also explain why they may still want to simply purchase all your valuable vehicles and equipment.
Decide whether you should sell the business yourself – or hire other professionals
Legal advice can prove crucial. You’ll also need help drafting the various legal contracts and documents required to support a sale.
You’ll want to work closely with your accountant. All your business and tax records must be fully updated.
A business appraiser can prove very helpful. This individual can help you determine a fair asking price for your company.
Even a brief consultation with a business broker can benefit you. This person knows how to locate a healthy pool of potential buyers. This process can prove extra challenging if you do not want to run any public advertisements.
Be prepared to locate or create various documents while trying to complete a viable sale
You must be prepared to share all your basic financial statements and records for the past three or four years. It’s also crucial to create a comprehensive list of all your company equipment and fixed assets tied to your business accounts. (Be prepared to spend the necessary fees to repair all valuable vehicles, equipment and other goods involved with the final sale).
It’s also important to create a detailed list of your ongoing sales transactions and the names of the companies that currently provide all your company’s most critical supplies. Copies of all current contracts and leases should also be made available so qualified buyers can review them.
Be prepared to carefully decide which buyers may be the most dependable ones
Many business owners prefer to sell their companies to close family members, trustworthy employees, friends or current customers. You’ll need to choose wisely, especially since this type of sale often takes from six months to two years.
Of course, never disclose private information about your business to potential buyers until after they’ve each agreed to sign non-disclosure agreements and qualified for financing plans that meet your requirements. Be prepared to negotiate carefully – or ask your attorney to handle the negotiations on your behalf.
If you’re ready to sell a business – or just want to learn more about all the various legal and practical steps referenced above, please contact one of our Murray Lobb attorneys. We look forward to answering all your questions.