Under the right circumstances, selling your business may be the best decision you’ve ever made. However, before you sell your business, there are certain things you need to consider in order to make the process run smoothly. The last thing you want to do is sell your business at the wrong time, for the wrong price, or for the wrong reasons.
To help you make the best choices, we have provided a recommended list of steps you should follow as you prepare to sell your business.
1. Identify your reasons for selling.
Before you begin the process of selling your business, it is important to think about your motivations for selling. Perhaps you are ready to retire, or you plan to move your career in a different direction. Perhaps you believe your business is at its high point and you want to make the maximum profit. Understanding your motivations for selling your business will help you to determine whether it is truly the best decision, as well as how you should proceed with marketing if you decide to sell.
2. Hire a team of professional legal, insurance, and financial advisors.
Once you are sure you want to move forward, the next step involves consulting an experienced team of advisors who can assist with legal, insurance, and financial matters. If you are already working with professionals in these fields, you may be able to turn to these professionals to form the team you need. Otherwise, you will need to seek out new guidance.
3. Determine and document the value of your business.
One of the worst mistakes you can make when selling your business is listing it for an amount that is either higher or lower than its actual value. If the business is listed too high, it may never sell. If it is listed too low, you will lose money. Use current, past, and future estimates of financial data to estimate your business’s fair value.
4. Review all business licenses, contracts, and agreements.
Prior to selling your business, it is important to review all of your licenses, contracts, and agreements to ensure that a sale won’t be problematic. Licenses should be up-to-date at the time of the sale, and all contracts and agreements should be structured to allow the sale to proceed without obstacles.
5. Make sure all business and tax documentation is accounted for.
As you proceed with a sale, prospective buyers will want to analyze your business and tax documents carefully. Make sure all of these documents are organized and available for review.
6. Review insurance policies and requirements.
Insurance policies may need to be altered or updated before you can complete the sale of your business. Review each of these policies to determine whether changes are needed.
7. Prepare succession plan agreements.
A succession plan will determine how leadership roles are passed on when the business is sold. Prepare your success plan carefully so that the business has the best chance of success after the sale is complete.
8. Share and organize business software information.
Your business’s new owner will need access to the software you use to operate. Organize this information and prepare to share it before you leave the company.
9. Notify employees.
After all other matters have been settled, it is time to notify your employees of your plan to sell the business. While some employees may hope to continue working for your company after the sale, others may choose to move on. These kinds of risks can greatly affect the valuation and sales price in certain situations. It is important to give them ample notice of upcoming changes so they can make these decisions.
We hope this has been helpful as you consider making this important decision in you and your company’s life cycle. As you prepare to move forward, please reach out to our team of professionals who have years of extensive experience helping business owners just like you. We will be happy to discuss your situation and help you find the best options for your organization.