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Thinking About Selling Your Business?
By Marc Clerc
As a business owner, it is never too soon to start thinking about selling your business. In fact, experts agree that the day you start your business is the day to begin planning for its sale. All successful business owners spend a lot of time and money to build a business. Selling at the best price without making a mistake that could jeopardize your future is critical. Here are some tips on positioning your business for sale:
Be prepared to invest considerable time and effort.
Make sure your financial reports and tax filings are accurate and current and consider your financial history - while business owners try to lower income for tax reasons, this will not help cultivate a favorable sale
Resolve any outstanding issues that may decrease the value of the business and add value to the business: paint the building, reduce costs, clean the office, reduce clutter, utilize contracts with vendors and customers
Ensure that the business continues to run successfully
Assemble a strong team of advisors.
Since most business owners will only sell a business once in their lifetimes, it is vital that you get help from a business broker, a certified public accountant and an attorney.
The Business Broker
The business broker will determine an accurate value for your business, prepare the business for sale and prepare a prospectus of your business to present to potential buyers.
They will also introduce your business to a wide range of potential buyers and qualify and negotiate with prospective buyers (to save you time and maintain confidentiality).
They will help you understand the advantages and disadvantages of each offer and guide you through the information gathering, or “due diligence” phase as well as help the buyer obtain financing for the purchase and assist in the final closing.
The Certified Public Accountant
A certified public accountant will assist in targeting a value for your business, organize your financial information and prepare financial reports to highlight the success of your business.
They will also help through due diligence, explain the tax advantages and disadvantages of proposed sale scenarios and prepare financial and tax documents for the closing
The Attorney
The Attorney will make sure that you understand your corporate form and meet your obligations to partners, shareholders, officers and directors and they will draft and obtain a signed confidentiality agreement before disclosing information about your business
The attorney will confirm that your prospectus does not make any financial forecasts or statements that can come back to haunt you
They will help you understand the terms of any offer or letter of intent and know the difference between a stock purchase and an asset purchase as well as draft and negotiate the terms of a purchase and sale agreement to protect your interest, along with an employment agreement and noncompete agreement for your employment with the business (if required).
An attorney will help you understand the implications of seller financing and prepare required documents for the closing.
Other Advice:
Make sure employees hear from you first. In some cases, you may not be able to tell employees about a sale until it is finalized. If key employees find out about a potential sale too early, they could leave the business and significantly affect its value
Do not count on a cash sale. The buyer will often ask you to partially finance the deal to make her up-front cost lower, and to assure you maintain an interest in the success of the business
If you partially finance the deal, protect yourself with a personal guarantee or other security interest
Time the sale right. If a national competitor opens a store across the street, it is probably too late to get a good price for your business
Know why you are selling the business - the buyer will want to know.
This article is intended to provide a general overview of information that may benefit a business owner and his or her business. It is not intended to be all-inclusive nor construed as legal advice. Please call us to arrange a meeting to discuss any questions you may have regarding your specific business needs.
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