5 Things to Consider When You Might Sell Your Business
By Heather Harteis, Director of Operational Magic
They say you put your blood, sweat, and tears into your business, but it’s more than that. It also takes your time, your patience, your heart, your energy, and your money.
But, maybe it is time for you to move on to the next thing in your life. If your business is successful, maybe you want to consider selling it to a new owner.
Here are 5 things to consider when you might sell your business.
#1
What’s for sale?
Make a detailed list of assets that would be included with the business sale.
This includes tangible things: physical items, furniture, equipment, vehicles, inventory, the tools of your trade.
Intangible assets should go on your list, too. What does your customer base and following look like? How is your reputation among clients?
Maybe you have valuable intellectual property: These could include your company’s brand name, brand lines, and logo(s), like any copyrights, trademarks, or patents registered federally.
Maybe there is value in your internal processes, or templates. If you have developed something special that works really well and it would be key for a new owner’s success, consider adding it as an asset.
Here’s one example of a decision to be made:
For a bakery, maybe your recipes will be sold along with the business. Or maybe they won’t.
If there are items NOT included with the business sale, write up that list, too. You will need to get everything in writing, so there are no misunderstandings about what is and isn’t included.
#2
Do you have a commercial lease?
A potential buyer will want to know if your landlord is willing to allow a lease assignment to a new person instead of you. They will also want to know:
How much time is left on the lease
Cost
If it comes with a personal guaranty making them liable should the business not succeed under their watch
Any other fine print may be relevant
#3
Get clear on your timeline, your reasons, and your financial goals
When would you like to exit your business? And is that timeline realistic.
Consider the finances of the business: how much money do you want when you leave?
Any potential buyer will want to know why: what’s your story? Perhaps you have family reasons, personal reasons, or retirement in mind. A buyer wants to be sure the business is successful before they make this purchase.
#4
Tidy up
Look very carefully at everything on your admin side: are your books, records, and documents in order? If you have been haphazardly shoving documents in digital spaces, now is the time to tidy up.
Sit down with your bookkeeper or accountant. Make sure your financial records are clear and complete. Take the time to understand them. During the sales negotiation, a potential buyer will want to look through your financial records to understand the profit & loss balance sheet. The buyer may have difficult questions to ask you about specific items in order to have a greater understanding about the financial health of the business.
You may want to hire someone to perform an independent valuation of your business at this point. This can provide you with a more accurate picture of what the business could be sold for.
Consider cleaning or repairing physical assets in order to make these items look as best as possible. There may be questions about warranties or maintenance records for essential equipment.
#5
When you’re ready, hire the professionals
You need a lawyer.
Sometimes folks also bring in a broker who is experienced with selling businesses.
Other times, people consult their financial advisor. You'll want to consider the tax implications of selling your business. Even if you trust the other party, you deserve to have professionals on your side. You should have a lawyer draft the agreement to sell the business.
We can assist with the legal documents when a business changes to new owners. We have experience drafting the agreement to sell the business. Our attorneys have also reviewed these documents on behalf of the buyer. It is essential that both parties have their own representation.
Get started with a no-cost service consultation today.
*This blog was written by a non-attorney and the content provided is educational, not legal advice.