People sell businesses all the time. Despite the myth that corporations are simply businesses that have lived in past generations and can’t disappear, the fact is that they are dissolved and taken over all the time.
The reasons vary, but there are plenty. Owners retire, they have a good idea someone wants to buy, or the business just can’t grow with its current owner.
Whatever the reason, selling the business allows it to continue in someone’s care. However, selling a business isn’t a simple thing like a garage sale. An experienced transition attorney like Gabriela Noemí Smith is well aware and can help.
Preparing a business for a sale takes time and planning. Without it, the sale is likely to fail out of suspicion and apprehension. On the other hand, with preparation, the business can exchange hands and titles smoothly.
Here is a checklist that covers the basics on how to sell your business.
The first step is to decide why a sale should happen and what is expected from the transaction. There is a very big difference between a sale for a profit versus a sale for liquidation, for example. Motivation drives how difficult the sale can be to achieve as well as how willing the seller is to make the transaction happen.
Second, a technical team will be needed. That typically includes the other owners or stakeholders, a lawyer representing the selling ownership, an accountant who has reviewed and knows the accounting books, anyone needed to explain the business operations in detail, a business advisor to help mediate the transaction, and anyone else who can provide technical assistance to answer the buyer’s questions.
The price of a business sale often starts with its market valuation. To make that happen, the revenue, earnings, and net income metrics of the business have to be measured objectively and detailed so that the buyer can see how the calculations are arrived at and reasonably agree with their objective values.
Ideally, a business is sold at its current value multiplied by two or three years for earnings potential. This rewards the owner for letting go of the business and becomes an investment for the buyer to recover if the business is worth the risk.
Preparing for a sale also means preparing the business to operate without the owner’s presence. After all, there’s going to be a new team involved.
So, the business has to be able to function on its own while the new team gets its legs transitioned in. Setting up these procedures for redundancy and seamless operation helps put a buyer at ease. They don’t have to deal with the anxiety of turning everything on; the business keeps its status quo until the new owner makes a change.
Buyers want to know specifically what will give them immediate value in taking over a business for sale. So, they need to see and expect to be provided with detailed information on the assets that will be included with the title of the business. That includes both real assets as well as intangible and intellectual property.
Make a point of ensuring this part is easy; prepare an inventory that specifies each asset, where it is, why it’s valuable, and what the new buyer can expect with the handover of the business and that asset. Remember, each additional asset boosts the value of the business and, arguably, its sale price as well.
One of the best ways to anticipate what is needed for selling a business is to put yourself in the buyer’s shoes. Ask the questions you would want to be answered if you were going to risk your money and investment to take over a company.
Answer these questions for yourself, and you will have them ready for the real buyer when asked. By preparing the information with purpose, you can convince the buyer that the sale is a good idea and commitment to take on.
Remember, buyers naturally favor lower risk and greater stability but are willing to take a trade-off with immediate value. Show them there is plenty of value to make the purchase worthwhile.
If you are seriously at the point when you are telling yourself, “now is the time to sell my business,” then Gabriela Noemi Smith can help. She helps small businesses and multinationals as one of the best corporate law firms in Dallas.
All businesses eventually need to be sold if not transferred or closed. We can help make the process happen smoothly and effectively. Contact us to get started.
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