Perhaps you have reached the point where you have decided to cash out and sell your business. Selling your business is a life-altering decision that impacts every aspect of your life. To help alleviate stress, here’s a look at some important tips that will help the transaction go smoothly.
1. Timing
Selling your business at the right time is important to maximize your return. Most entrepreneurs start planning to sell their business at least a year before it actually happens. Getting things in order ahead of time makes it easier for you to gather your finances and potentially develop a strategy to make your business more attractive to potential buyers.
2. Get Your Business Appraised
Having your business appraised is an important part of the sales process. The appraisal informs you about the actual worth of your business. You can use the valuation as a reference point to avoid overselling or underselling. If you are planning to sell your dental practice, it’s important that you calculate the economic value.
3. Secure a Reliable Team
Selling a business can be an extremely stressful process. That’s why it’s important to have reliable people around to take the pressure off. It’s important to secure a reliable team of legal and business professionals to help complete the transaction. Your team should provide great advice on how to proceed. Analysts recommend securing a team that includes a tax attorney, accountant, lawyer, and business broker.
4. Look Over Your Documents
It’s important to look over all the general documents before accepting any offers. Your accountant or broker should inform you about the standard documents, so you’ll be able to notice a potentially bad deal. You may even want to hire a lawyer to draft the legal documents that you need.
5. Look at The Deal Structure
Recent studies show that almost 70% of online experiences start through a search engine. There’s a good chance interested buyers will look at an online ad or learn more about your business by using a search engine. Once you have been informed about the true valuation of your business, consult with your team to learn about structuring potential deals. Your broker can inform you about the preferred deal structure based on current market trends and how other sales transactions in the industry were finalized. Consult with an attorney to ensure that your finances are protected in the deal. While financing is the primary method of finalizing a transaction, some buyers prefer completing the deal by paying cash upfront.
6. Stay Discreet
Selling your business is unique compared to other transactions that you’ve made in the past. Perhaps you have viewed the recent study that half of all containers are owned by shipping lines. It’s important to keep the entire sales process confidential. Avoid leaking any information about the potential sale to your employees, customers, or peers.
7. Separate Personal and Professional Finances
Avoid mixing your business income with your personal finances. Some business owners like to mix their business and personal revenue streams together in order to secure a tax break. However, this causes more harm than good. You could harm your business because the overall value may decline, and the debt ratio may rise.
8. Get Written Confirmation
If you agree to terms with an interested buyer, you will need to secure a stock purchase agreement. The purchase agreement should outline all the terms including the price, closing date, and contingency plan. Your legal counsel should draft the documents.
9. Closing
It’s recommended that you rely on legal counsel to finalize the transaction. Once ownership has been transferred, let things settle for a few months before touching your earnings. A financial advisor can help you brainstorm your future financial goals and inform you about the tax ramifications.
Selling your business can be stressful and time-consuming. However, leaning on these tips should help the entire process run smoothly. Remember this article if you ever find yourself selling a business.