While some entrepreneurs may make a full career out of building up and operating their business, you may have other goals. You may want to pursue diverse business ideas. Or perhaps you are contemplating retirement. This may cause you to consider sale of your current business in the not so distant future. Yet, as excited as you may be to turn to a new chapter, you aren’t certain how to close this one.
Even if you’re just entertaining a hypothetical sale at this time, it is beneficial to start acting now. You don’t have to put your business on the market immediately. In fact, this is likely a costly mistake. Instead, there are steps you can take to prepare your business for sale which will pay off in lucrative ways.
Preparing far ahead
No matter how eager you are to move on to your next big venture or retirement, selling a business should not be rushed. While some may feel as though their business’s reputation speaks for itself, providing evidence to back up a business valuation is instrumental to achieve a rewarding deal. Proof of a company’s success along with its asset value will indicate its true value. An article found in Investopedia contains a wide range of information which serves as indicia of true value. For instance, in addition to good financial results, owner addbacks, goodwill found in customer retention and niche offerings along with market value of equipment, are all important assets. For which you want to receive full value. In the event some hiccups have affected financial performance, identifying the cause of the adversity and how it has or will be overcome is essential. In some cases, correcting adversities before marketing the business will make it considerably more valuable.
Envisioning the day of the sale
Contemplating the day of the sale can feel like a triumph in its own right and you might be tempted to quickly set a price and sign whatever documents are necessary and continue on your way. But that sense of liberation is no excuse to slack off too early. An article in Inc. Magazine details a list of obligations you’ll need to meet to make sure that the closing day runs smoothly. Everything from proper preparation and review of documentation to correct transfer of assets, obtaining indemnification from future liability, not to mention when and how your employees, customers, lenders are to be notified. Finessing every detail is crucial. All this should be navigated well in advance of closing.
When to act
In sum, once you identify you’ve been pondering the hypothetical sale of your business, it is wise to look into considerations that can make a sale more lucrative with reduced future risk. Confidentiality agreements, deciding who is on the transaction team, how to fix issues that are adverse to the highest possible valuation, letters of intent, purchase and sale agreement provisions, when to notify constituents – all must be considered before entering into sale negotiations and during same. The sale of a business is a complicated endeavor. At least if handled correctly. All sellers (as well as buyers) can benefit from seeking out mission-critical resources, including attorneys who are well versed in the “art form” of business transactions.