A. You might consider selling your business if you wish to achieve one or more of the following objectives as a business owner:
Selling part or all of the business may be the best way to achieve your objectives. You might, for instance, want to sell your business outright, leaving you with no financial or management involvement. It’s worth considering the different ways by which businesses come on to the market and how you can maximize the value of your business.
A. Selling at the right time can have a significant impact on the price you get for your business. Plan ahead so that you can pick the best moment rather than being rushed into a quick sale. The general state of the economy - and your sector in particular – can play an important rule. It may be easier for a trade buyer to fund a purchase when their own business is doing well, interest rates are low and banks are keen to lend. The state of your business is a more important factor. Aim to sell when profits are increasing and look likely to grow further. Consider the impact of sales cycles or seasonal fluctuations in your business - you might have fuller order books at a particular time of year, for example. Planning well in advance also allows you to groom other aspects of your operations to ensure your business is as attractive to buyers as possible. The amount of time it will take to sell your business may vary significantly- depending upon a number of factors. These factors include deal structure, the time of year, the true value of the business versus the asking price, the size of the business and the local market. The most important factors are usually price and the ability to effectively locate qualified buyers. .
A. There are several different sale options:
Your choices can affect buyers’ interest and offers. They can also affect the tax treatment of the sale.
A. A diligent buyer, once decided about your business, will seek to substantiate and confirm every phase of your business through a thorough examination known in the industry as due diligence. This may include a review of your marketing and operations -- product lines and services mix, management structure, customer and market base, and compatibility of operations. They will want to know how your company or business is classified -- manufacturer, retail store, wholesale distributor, service company, etc. They will review your financial condition including financial statements, tax returns, depreciation schedules, payroll records, etc. They will want to see your company's earnings (profit before taxes) for the past three to five years, as well as your net worth. They will review the assets of your business -- facilities, equipment/vehicles, inventories and leasehold improvements. And they will examine your legal status -- pending or potential litigation, title or lien searches, and lease agreements. They will want to know about employment contracts. If they are buying your stock, they will want to review your corporate minutes and corporate paperwork. If necessary for the business, they will want to know about your patents, licenses, permits and franchise agreements.
A. There are, in fact, a limited number of options available for marketing a business for sale. They are to advertise oneself, use a realtor or broker, liquidate, or use a professional marketing firm. In addition to the actual advertising and marketing of the business, when considering these few options, there are certain critical issues to evaluate with each when trying to determine the best option for your business:
A. Only very basic information about your business should be disclosed to a buyer prior to their signing a non-disclosure agreement ("NDA"). An NDA can help protect the confidentiality of any information given to a buyer. Once an NDA is signed, the buyer can be given additional financial and operational information about the company in order to make an informed offer for the business. After an offer is accepted, a significant amount of detailed information will be required during the due diligence process ranging from a review of incorporation papers and other legal documents to a thorough review of accounting work papers and meetings with key employees.
A. Unfortunately, setting the right asking price for your business is not easy. To determine a price that is fair and still entices potential buyers, most sellers leverage the expertise of a professional appraiser or business broker. However, there are several steps that will help you prepare documentation to help in the appraisal process and formulate a ballpark estimate of your own:
A. You should think about the terms you are willing to accept in addition to the price. Factors that will influence this decision include your personal financial situation and the financial health of your business. You should also be thinking about choosing between specifying an all cash deal and offering seller financing. A question to be considered is -what, if any, level of involvement you want with the business after the sale. You need to be flexible and willing to negotiate to increase the chance of selling your business on mutually agreeable terms.
A. When selling or valuing a business, it's generally a good idea to recast your financial statements. This involves examining your financial statements to eliminate the effects of - having run your business to reduce taxes as much as possible; engaging in transactions with related companies on a non-arm's length basis; or otherwise shifting some expenses to the business which could also be classified as personal, if any of these actions differ from how the business would have been run if it were not closely held. The adjustments can increase or decrease the balance sheet, income statement, or other metrics upon which the business is valued.