The thought of selling your business can be overwhelming, especially once you start diving into the steps involved in achieving a successful sale. It is entirely normal to feel nervous at first; however, it will give you peace of mind to know that the more prepared you are when approaching the sale, the more confident you will feel throughout the process.
Here are the first steps to selling your business that will help make sure you are prepared for the sale.
Determining a realistic price range
When it comes to sales, everything starts at the right price. If you make the mistake of pricing your business too high without just cause, you will scare buyers away.
Price it too low, and you’ll be taken advantage of.
Determining a realistic price range for your business can be tricky, especially when your business is unique in its history, clients, and potential, which all impact market value.
The best way to determine an accurate, realistic price range is to consult a business advisor or accountant who can assist you in valuing your business by using valuation methods. Valuation methods may involve the total sum of your business assets and goodwill, comparing your business to similar competitors, or using an industry formula specific to your niche.
Understanding the tax consequences
Tax implications that come after the sale of a business can take a massive bite out of the money you were hoping to receive. To fully understand the extent of tax consequences from a sale, it pays off to have a talk with your accountant.
Updated financial information
When you’re looking to sell, it’s not just about making your business look good from the outside. The behind-the-scenes figures also have to look nice.
This means sprucing up your financial information to be in good shape as you may be required to provide potential purchasers with financial statements of the business to demonstrate profitability. The financial information that may be requested may date back as long as the last three financial years.
Looking for buyers
If you don’t look, you won’t find. The saying is relatively true when you’re looking to sell a business. Sure, you might have heard stories of the lucky individual not looking to sell his business and gets approached with a multimillion-dollar cheque asking them to sell their business for above its value.
Unfortunately, not all of us are lucky like that, and selling a business may require more work to be done. Efforts may include advertising your sale in newspapers or trade publications, websites that accommodate sales of businesses, or engaging a business broker to reach more buyers.
Negotiating your deal
When working out a business deal, you have to identify the framework of your sale. Are you selling the business entity? Or are you selling just the assets?
What assets are you keeping? How will the transaction take place? How will you get paid?
These questions are all just the tip of the iceberg, and you will need to prepare yourself with answers to like questions to be ready for negotiations. You could save yourself some stress by engaging a lawyer who can assist you with the negotiations of the deal.
Signing the contract of sale
With all business dealings, it’s always safe to have it in writing. The contract of sale should list the value and assets being sold along with any contracts that the buyer is assuming, for example, leases, hire purchase agreements, franchises, and so on.
Always make sure that your interests are protected and that by the end of the transaction, you will get the full sale price in accordance with the agreed terms of payment.
Planning for settlement
You’ll also have to plan for settlement by signing various documents to complete the business transfer to the buyer. Your lawyer can assist you with the technicalities.
Filing necessary paperwork
Make sure to retain a copy of the Contract of Sale along with any other important documents that record the sale of your business. This information should be kept safe for at least 7 years to avoid any claims being made against you with regard to a failed transaction.
Certain paperwork needs to be filed with the government and other authorities to ensure business records are kept up-to-date. You can request your lawyer to do this for you on your behalf.