How-to prepare your business for sale
Before you can sell your business, your paperwork must be in order. This means compiling your company’s financial information, vendor contracts, customer information, employee job responsibilities, etc. Depending on your individual situation, you may be able to do this yourself, if you can dedicate the time. Or, you may consider retaining a consultant experienced in helping business owners like you plan your exist strategy and then prepare your businesses for sale.
How do I set a price for my business?
How much is your business worth? You need to know that number before you put your business up for sale. Key is to ensure that your assets, both tangible and intangible, are properly valued. Consider engaging a qualified business appraiser to collect and analyze this information or, if you have the skill set, you may be able to do this yourself.
What is the difference between tangible and intangible assets?
Tangible assets represent physical assets, including real estate, equipment and inventory. Intangible assets are not physical. These may include goodwill, brand recognition, intellectual property (such as trademarks, copyrights, and patents).
What are my valuation options?
There are several strategies for valuing your business. These include:
- Income method. This method values your business based on projected revenue and considers potential risks.
- Market method. You compare your business to similar businesses that have recently sold.
- Asset method. This adds up the value of your business’ assets and subtracts your business’ liabilities.
How do I find a buyer for my business?
Once you have decided to sell your business, how will you find a buyer? Again, depending on your situation, this may be something you can do yourself or you may want to hire a business broker. If for instance, you are going to sell to a key employee you probably do not need a broker. Or, if you have already negotiated a price with a buyer you may not need a full-service broker to maximize the price you will get for the business. However, working with a broker can be the best option. Typically, a broker will spend time vetting buyers, ensuring the confidentiality of the process and answering potential buyers’ questions, freeing you up to focus on operating your business.
Got a buyer? Need a contract.
Congratulations! You have found a buyer for your business. Now what? It’s time to create a contract of sale. Typically referred to as an asset purchase agreement, this contract identifies the who (you and the buyer), what (the business you are selling and its assets), when (when the sale will close) and how (the deal will be structured.
To reiterate: Your contract must identify, among other things, the buyer and seller, the assets to be sold, the price and terms of payment, the parties’ obligations prior to closing the sale and any documents which will be signed at closing to ensure a transfer of your assets. Such documents may include, for example, a lease assignment whereby your landlord will agree to recognize the buyer as the new tenant.
Bottom line, if you are ready to sell your business, do not feel you must go it alone. Speak with your attorney and other experts. Still have questions about selling your business? Feel free to reach out to me, Julie Lusthaus at [email protected], and let’s talk.