Any business owner planning to sell their business will have to go through these 4 steps which are typical in a business sale:
- Decide If You Are Ready To Sell Your Business
- Determine The Value Of Your Business
- Find A Buyer
- Ensure A Smooth Transition
All 4 steps require a lot of hard work, decision making and effort. If you are contemplating on the idea of selling your business, it is important to follow a plan in order to ensure that you cover all your bases. Anyone planning to sell their business officially needs to prepare a Sales Agreement. The agreement needs to be accurate and must contain all the terms of the sale. It is advised to consult an attorney who can review the sales agreement to make sure everything is in order.
Some of the items that need to be addressed in the Sales Agreement include:
- Name of the seller and business name
- Details of the buyer
- Background information regarding the business
- A detail of the assets being sold
- List of inventory that is included in the sale
- The decided purchase price
- Not to Compete Agreement
- Detail of any adjustments that need to be made
- Terms of Agreement
- Payment terms and conditions
- Any warranties and representation of the seller and buyer
- Detail of any fees that have to be paid, including broker fees
- Date of closing of the business
What Makes A Successful Transition?
A number of factors play a crucial role in the successful sale of any business. If these factors are taken care of, it will net a higher sale price ultimately. Some of these factors are given below:
The business should be able to operate without the owner – Most buyers will go for a business where the owner or entrepreneur is not an important part of the business. The business should be able to independently operate without the involvement of the entrepreneur.
The business should have competent staff – If incompetent people are employed by the business, such as in the case of family owned businesses who favor their relatives over qualified personnel, then that will lead to a lower selling price in the business sale.
The business should be using proper form of debt to capitalize it – Some entrepreneurs take on a lot of debt which leaves them with very little cash flows at closing time. Even if ‘good debt’ was taken on, it must be paid back by the owner at time of sale.
Fully understand any Handshake Deals – An entrepreneur may be tempted to go ahead with a ‘handshake deal’ in order to grow their business. However, if the document is not properly read or understood at the time of signing, it can cause trouble later on.
Have a qualified accountant – In order for the sale process to navigate successfully, there has to be an accountant who has in-depth knowledge about the business as well as the owner. That accountant should evaluate the deal terms before any of the purchase agreements are finalized.
The presence of these factors will make the sales process as smooth as possible for the entrepreneur. For more details, it is recommended to get in touch with an experienced attorney before you plan to go ahead with the sale.