As an entrepreneur, you’ve probably put lots of thought into the best ways to start and grow your business. But you likely haven’t put nearly as much effort into thinking about how you’ll sell it or exit it, in general. And if you decide that selling is the way to go, you’ll want to start considering that now, whether you are just starting out or have been in business for years.
Putting your business up for sale is not something you want to do on the fly or without careful planning. You’ll need to clearly understand your company’s competitive position in the market, determine a realistic asking price, and carefully evaluate potential buyers’ suitability in order to position your business for sale.
Before you put up a “For Sale” sign in your front window, review these four strategies to maximize your chances for success.
1. Prepare your business for sale
You don’t want to get stuck trying to sell your business at the last minute due to unforeseen circumstances, such as a debilitating illness or the arrival of new technology that renders your business model obsolete. It generally takes an average of two to four years to sell a business, so you should develop your exit strategy as soon as possible.
Before you can come up with a sales price, you’ll need to gather and organize a hefty amount of documentation—financials, tax returns, business records, and other materials. What’s more, proper preparation is also vital for closing a sale: Buyers will be much more likely to purchase your company if they see you’ve taken the time to thoroughly prepare your sales portfolio.
We can facilitate your planning and preparation by ensuring you have all of the proper records and documentation you need to properly value your business—and wow potential buyers.
2. Effective valuation and pricing
You no doubt want to see the maximum return on all of the hard work you’ve put into building your business, but you must be realistic. Valuing your operation should be based strictly on objective data like current market prices, cash flow, and growth forecasts. You can’t let emotions cloud your judgment, so seek the opinion of a professional appraiser for an optimal valuation.
You must also determine the total cost of the sale. Before setting the price, carefully factor in all of the taxes, fees, and other expenses that will be deducted for the asking price, so you don’t end up shorting yourself.
We can assist with accurately assessing all financial and tax obligations that come with a sale, as well as advise you on any potential legal issues that could influence the process.
3. Vetting potential buyers
While interested buyers will be investigating you and your operation, you should carefully vet them, too. Even if it’s a friend or colleague you know well, you’ll should carefully select and pre-qualify every potential buyer. And since you’ll be sharing sensitive company data with them, you should require buyers to sign a confidentiality agreement, not just to protect your privacy, but also to weed out those who aren’t serious.
And don’t just sell to the first person to walk through the door. Having multiple buyers will give you alternate options if a sale falls through and provide you with valuable leverage when negotiating the final price and terms.
We can be an invaluable asset in helping you evaluate qualified buyers, along with creating confidentiality agreements and other legal documents needed to properly secure the sale.
4. Don’t go it alone
Selling a business can be a massive undertaking, making it difficult to juggle the sales process with all of your other day-to-day responsibilities. And though you may be a pro at running a business, you probably don’t have the same knowledge and experience at selling one.
For these reasons, you should seriously consider hiring a business broker. An experienced broker can take care of tedious tasks like supervising preparation, buyer pre-qualification, and showing the business. Of course, brokers cost more than doing it on your own, but they have an insider’s knowledge of the market, so they can be invaluable for maximizing efficiency and profit.
We’re in your corner
Meet with us to help coordinate and facilitate the sale of your company. We can guide you every step of the way and serve as your trusted advisor for the numerous legal, financial, and tax matters that come up along the way. We can also help put you in touch with brokers, valuation experts, and other professionals we trust to assist you with matters outside our expertise. Contact us today to get started.
This article is a service of Jayaraman Law, LLC. We offer a wide array of business legal services and can help you make the wisest business choices throughout life and in the event of your death. Call us today to schedule a consultation.