So you’re ready to sell your business? Selling your business can be an excellent way to realize the value built up over the years of running your business and to generate income as you transition into the next phase of your business career or life. But where do you start? Listed below are a few steps to review and help you prepare for the business exit planning and actual sale process.
- Set a Timeframe. When do you want to sell? Set a date, but make sure you factor in the time to plan for your business exit, finding a successor or buyer, and the potential for post-closing work and assistance that may be required. Starting the process early and having time can be one of the biggest ways to maximize sale value and find the right successor for your business.
- Self-Education. Spend some time researching the process, the applicable industry standards, and the practical concerns of putting a business for sale in the marketplace or transitioning to an internal buyer. Do some reflecting during this phase as well in order to know what your goals are and how the industry, your business, or the process may help or hinder achieving those.
- Get Your Team In Place. You can’t go it alone, although it may be tempting: as a business owner, you have handled a number of things when the needs have arisen because there wasn’t always time or a choice, but if you are going to do this right and want to create the best outcome for your personal benefit as well as the legacy you leave behind, you need the right advisors involved early in the process. Having the right people to help you through the process will not only make it easier but can also have a dramatic effect on the bottom line. Additionally, you are trying to run a business to make sure profits stay strong during any sale process, so your time and focus are limited. Find yourself a qualified business broker or intermediary and involving your attorney, CPA, and financial advisor will pay huge dividends as the deal moves forward. We make sure that our clients know how to pre-structure their deal from the legal, tax, and financial arenas so they understand when the negotiation dust settles that they are still in the needed position and have received the value required for their personal plans.
- Value your Business. It is a good idea to have a verifiable idea of your company’s value before placing it for sale or starting any process for the exit. And while some business owners over-value their business worth and some under-value, the marketplace and a potential buyer may see things differently. Consult with your business valuation expert on current value and ways to increase or market the value to the right buyer groups.
- Analyze and Initiate Steps to Make Your Business More Valuable. Get your business in the best shape possible. Financials management, key-customer relationships, strong revenues and profits, intended timeframe for sale, and employee management are just some of the factors that go into valuing a business. There may be ways to improve efficiency and results in any and all of these areas. If you give yourself enough time, these improvements may make the business more appealing to potential buyers and may lead to increased sale price and take-home profits.
- Develop Your Strategy. Consider the type of intended buyer, your financial needs for retirement or next phase (consult your advisor team), necessary sale price to provide for those needs, tax strategies, internal communication, and transition needs, and other desired terms of sale. Prepare your strategy. It may and likely will change, but don’t jump into the sale process without that knowledge.
Selling your business does not happen overnight. It takes months of prep as well as months, if not years of planning and thought to truly maximize the exit value and make it a real success. Seller’s remorse is a real concern in the business owner arena as well, so preparing early in your timeline and going through the proper steps can help minimize that risk and maximize the value to you from the business you have worked so hard over the years to build and grow.
Our attorneys are here to help you plan and strategize for the sale of your business.