There are several key reasons why a business owner would consider selling a business. One reason would be that the business was not profitable anymore or never was profiting them. A second key reason is that there have been disputes within the company, management or with business partners. The third key factor would be that the business owner is looking forward to retirement. When a business owner decides to sell a business it is a defining moment in his or her life. It is important to make certain that the decision is for the best and there won’t be any future regrets for having sold the business. This article will address several factors entrepreneurs should consider before planning to sell a business.
Where to Begin the Consideration Process
The process of considering whether or not to sell your business first begins by fully understanding your “why”. You need to solidify in your mind your reasons for selling so that when the process is over you will not regret your decisions. Once you have cemented your reasoning in your mind, you can move further along in the process.
- Timeframe – It is vital that you consider the timeframe for selling your business. This step needs to be well thought out and planned because during this time period, you still need to ensure that your business is running as efficiently as usual. Now is not the time to let things go. Your business may be unprofitable, but you still need to continue working while you are trying to sell it.
Resolution to Sell Business Assets
A document used to formally confirm that the corporation will accept the offer to sell all business assets.
Begin the Planning Stages for the Sale
There are three key factors that are involved in the planning stages for the sale of your business. Those factors are discussed below.
- Buyers – Selling your company is not as simple as making a decision to sell and the right buyer will magically appear. You need to answer the question of how you will be able to attract the right buyers for your business. It is important that you highlight three main factors about your business—you have an established clientele, your profit and your ongoing contracts. Those three factors make your business a viable option for interested buyers.
- Value – The second factor involved in the planning stages is to ascertain the value of your business. Many times, buyers and sellers differ in their perception of the worth of a business. This is when it would behoove you to seek the advice of a certified business broker to assist in the assessment of your business value.
- Opportunity – This last factor during the planning stages is where you should focus on the opportunity that your business affords. For example, you need to determine the areas of opportunity that your business can grow. You must ascertain where your company is positioned in the market. It is also vital that you fully comprehend the competitive landscape of the industry field where your business operates in.
Purchase and Sale of Business Agreement
This agreement is used when a company (the Vendor) agrees to sell to another company or individual (the Purchaser) all the undertaking and assets owned by the Vendor in connection with the particular type of business.
Activate Your Sale Action Plan
After having fully considered all factors in selling your business and then taking steps to plan the process, you need to activate your sale action plan. The factors involved in that process are discussed below.
- Advice – At the top of your action plan should be the step of seeking professional advice. As previously mentioned the certified business broker should be utilized to assist in valuation of your business. However, now as you are beginning the sale process, it is important to seek advice from professional tax and estate planners.
- Timing – It is vital that you decide on the most fitting time to sell your business. There are several important factors to consider: internal and external environment as well as governmental tax policies.
- Finances – It is important to have the pertinent financial records in order to ensure a successful sale. The following is a listing of the appropriate financial records needed: financial statements, accounting records, taxes, systems and controls, working capital and capital expenditures.
- Buyers – This step in the action plan involves finding your potential buyers. When you locate the right one, it is important that any agreements are put into writing. Such documents would be the purchase agreement and the non-disclosure agreement. Additionally, you need to consider the escrow procedure. You can open an escrow account with the bank or an escrow company.
When a business owner or entrepreneur begins to consider whether or not to sell a business, there are many factors to consider as outlined in this article. The process begins with considering your why and the timeframe involved. The second stage involves planning your action steps and then you need to implement the plan and find a buyer.