Have you considered selling your business? Maybe you want to retire or simply want to take a break before pursuing another business passion. Thinking About Selling Your Business is the start of an unfamiliar process for most business owners. There are many options to consider before selling a business such as selling assets of the company to complete stock sales. Each has different tax implications. These are just two of the many considerations you will have to make before even starting the sales process.
For most business owners selling a business only happens once. Just like having a good real estate agent makes sense when it’s time to sell your home, having a business advisor may make sense too. Business or merger & acquisition advisors make sure you don’t have to handle the process alone.
Tips On How to Sell Your Business
The first step to preparing for sale is to evaluate how much your business is worth. While most business owners want to manage profit to pay the least amount of tax possible, it may make sense to pay the tax for a few years and recoup the cost later as the result of a higher valuation. Leaving money in the company and paying more taxes also show how profitable the company is prior to sale. Bookkeeping and record keeping are also key elements of the documenting the valuation of the company.
The Dos
- It is highly recommendable you create a timeline to provide your potential buyers with a realistic valuation. Once you can prove your business is doing great by showing growing revenues, it is easier for the buyer to get involved. But of course, you need to show profits over time. Possibly, over several years.
- Without an M&A advisor or business advisor, finding potential buyers can be difficult. A business consultant can also help you source funding to grow your business to help increase its value prior to seeking a buyer. So, take your time to find advisors that will reduce risk and provide you with the right marketing approach.
The Don’ts
- Don’t try to sell your business without some objective idea about what it’s worth. Small businesses are sometimes difficult to value due to size and lack of comparable businesses in similar geographies
- Never proceed with signing the LOI without having a third-party, such as an attorney, review it. The agreement for selling a business is complicated and legally binding. You may see earn-out, retention language, hold-backs or reps and warranties. Don’t get focused on getting the deal done or only on price.