Selling a business can be a long and complex process. It is important to be prepared when making this important decision. Here are a few things to consider:
Value Considerations before a business sale
One of the first considerations when planning a business sale is determining the value. In order to evaluate how much the business is worth the following information is necessary:
- Profits and losses from the previous three years
- Federal Income Tax returns for the business
- The lease and lease-related documents
- A list of the loans against the business (amounts and payment schedule)
- An approximate amount of the inventory on hand
- Any other financial statements related to the business and its employees
Keep in mind that the value of your business is also determined by the current market and may change year to year.
Is the business appealing to potential buyers?
Besides financial outlook and profits, potential buyers will also look at the location of your business, employees, and cash flow. To attract potential buyers you can consider the following:
- Improve and modernize the appearance of your business or office space.
- Keep accurate and detailed records, including: clients, inventory, expenses and any other relevant information.
- Help the new owner get started by creating an operations manual or agreeing to stay on for a while after the business sale in order to provide some guidance.
- Make sure your business meets all relevant government standards.
How to structure the business sale?
There are two primary ways of transferring ownership of your business. The first is through the use of an asset purchase agreement. This type of business sale involves selling particular assets directly to the buyer. There are many legal considerations that go along with this method, including transferring inventory, accounts and office leases. Buyers may also require a non-compete provision in the agreement. The second method of buying a business is a share sale. This method involves the seller buying shares of a company from shareholders. The type of business sale appropriate for your business will depend on a number of tax and legal considerations.
Selling your business is a significant decision, but with the right help your business sale can be efficient and worry free.
This post is for informational purposes only. It is not intended to be, nor should it be construed, as legal advice. Always consult an attorney, licensed in your state, before taking legal action.