1). Have a plan.
Planning the exit of your business in advance puts you in control. Selling the business when you are ready rather than when you have too, will make an enormous difference in value and put more money in your pocket. The first step you can take right away to start planning is to have a business valuation completed. The valuation will give you an opinion of the fair market value so you can measure whether you are on track or have a gap in what the business is worth and what you are forecasting to receive from the business sale. From this we will coach you on the additional steps you can take now to grow the value of the business.
2). Prepare your next steps.
There is a huge emotional factor when selling your business. It is important to have plans for the next chapter after the business is sold. It is so much better if you can say I am retiring so I can do fill in the blank, rather than I am retiring so I do not have to do fill in the blank anymore.
3). Consider a longer transition - Consider a longer transition period of 6 months or longer especially if there is not anyone in the company that can take over your job. Especially on smaller transactions often the buyer may be a first-time business owner and needs a mentor to learn the business. Having an extended transition allows the seller to make additional money on the sale and additional time to plan next steps.
4). Consider offering seller financing – With the sale of a business comes large tax consequences. The business owner can defer a portion of the taxes with seller financing and earn additional interest on the note. Offering seller financing with the sale shows the buyer that you are confident in the businesses future performance and will get you the highest price.
5). Have your financials in order – When you begin to think about your exit plan it is important to have clean and accurate numbers to present to a potential buyer. If you are not doing this already it is important to have quarterly financial statements prepared and available. Clean up and document any expenses that are discretionary and/or non- recurring. Discretionary expenses are those that the business paid for but primarily benefit of the owner. Non-recurring expenses are expense that are very unlikely to reoccur, such as a major building or equipment repairs, moving expenses, a lawsuit settlement, a one-time set up cost, or research & development expense.
6). Review Lease and other contractual agreements - The lease can play a major factor in a business sale transaction. When preparing for a business sale it is important to read and review the lease. Give particular attention to the assignment, transfer, and termination clauses. On occasion, there can be a
transfer fee, penalty, or cost charged by the property owner. Also find out if the lease is assignable and
check the maturity date of the lease. If the lease matures within the year, you are considering selling the business, it may be smart to renew early and/or negotiate new terms now.
These are six of the important steps you can take to prepare and make your business sale a success.
Selling a business is a complex process that most business owners have never experienced. As soon as you start to think about selling your business give us a call, and we will guide you through the entire process. Our expert advisors will provide you an opinion of value and and give you a road map to prepare, market, process and close the sale.
