Small Business for Sale – A Brief Primer
April 10, 2016 Selling Your Business
“Thinking of posting your small business for sale? You might want to read this!”
Finding the proper way to sell your small business can be challenge. Whether you are looking to do it on your own or seek help from a professional. Knowing what tools and advantages you have at your disposal will ultimately help you sell your small business. We have put together some information that will propel you in the right directions. I know you have many different options and decisions to make when considering selling your small business. That’s why we are providing you with this starting point. Selling your small business is going to be one of the biggest steps you have ever taken in your business career, you want to make sure you have all angles figured out and are ready for all possible out comes.
When you go and do the selling of your relatively small business enterprise, the venture can become complex. Going into the process of your small business for sale will need the services of a professional broker, an accountant, and a lawyer much earlier into the process.
The decision to sell your business will put you in the middle of some real-world considerations before you proceed. Knowing what to do, how to do them, and knowing the people who can help you – all of these can save you much distress on later consequences, if any.
One primary rule of thumb is that if you overprice, nobody will present you an offer and if you underprice, you will lose money. The following are some of these considerations.
Why are you selling?
There are many reasons to bring out to your prospective buyers why you are selling your small business. However, you need to present these in a positive manner that does not conflict with reality.
A profitable company is usually kept by the owner and not sold. When your business is found losing money, the depressed sales figures can shave off big chunks of your offered price.
There are many reasons for the decision to sell. You can cite any of them (retirement, some difficulties with partners, deaths and others). However, most prospective owners are not too keen on them if there are other positive aspects that can take away their attention.
When? How much?
Pre-plan your decision to sell way ahead of time (maybe as early as a year or two). This allows you to improve on your financial and sales records, documents, and other pertinent needs in the ownership transfer.
“How much” is another critical aspect of your decision. Much as you would want to do it, the best recourse is getting an appraised valuation of your business from a recognized professional. This will give you leverage on the price and give it credence to prospective buyers.
A professional appraiser can lay down the details of the worth of your small business for sale. You would also want its worth (even in ballpark figures) so the price does not swing too high compared to those in the market. Pricing it too low is also out of the question.
To complete your professional touch, hire a specialist in business appraisal so you can determine the nearest price of your business. Your specialist will have a look on the profile of your business, and your list of assets to compare with those similar businesses in the area.
You can help by providing your appraiser the other assets of your business that will go with the sale. These assets can include company cars, buildings, office equipments and accessories, present inventory and others.
Selling the Business
You can go either way in selling your business – doing it with a broker or doing it yourself. When you do it yourself, you do not pay any commission to your broker. You can save money if you’re selling to a relative or to an employee.
You can have your broker conduct the sale for you so you can get on with your business and have the sale under wraps from unnecessary people. With your broker doing the selling, the price can get very high (your broker wants to raise his commission) or it can turn off some of your prospective buyers.
Documents and Others
Have your important business papers (permits, licenses, leases, agreements) to review with your accountant. Included would be your important tax returns and financial statements.
Include, too, your sales transactions and supply procurement documents together with the list of your company contacts. Also relevant to your prospective buyer would be the operations manual on your business. Defective equipments also need to be replaced.
You can always let some room during negotiations, but you need to be firm on the price you think is reasonable and worth your company and its future. Agreements have to be done in writing and your buyers will have to sign a confidentiality agreement for your protection.
Your buyer in turn might have you sign a non-compete agreement which basically bars you from starting a new and competing same line of business.
Your attorney can make the sales agreement that include the final sale price (which include the asset list) and the financial obligations of the buyer. This includes down payments, installment schedules, etc.
If done by somebody else, your attorney can review the document to make sure all the agreed areas are in order as written before being signed.
Sometimes, your small business for sale might take up much of your time, and maybe extract some toll on the emotional end. However, with the right timing, the assistance of the people you signed in for the job, the process is not that unforgiving and can even be quite worthwhile. As this could be one of the single biggest sales you will make in your professional career. You will have to weigh the options and reach out to a professional for help. Happy selling and we wish you the best of luck getting your business sold.
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