An entrepreneur may choose to sell their business for many reasons. They may be ready to retire and move on to a new chapter of life. At times, their spouse is relocating for their job and the owner wants to go with them. Other people find the business is no longer a challenge and they want to try something new. Regardless of why a business owner chooses to sell, certain steps should be taken. The following serve as three of those steps.
Have Everything Organized
When the time comes to sell your business, potential buyers will want an in-depth look at what they will get if they make the purchase. Be ready to share this information. Have all financial records in order and gather any necessary documentation.
This might include a signoff from shareholders or legal proceedings. For e-commerce businesses, the buyer will want a traffic report and related data. Work with an attorney or business broker to ensure everything is in place before the business goes up for sale.
Prepare a business memorandum for buyers to review. Include an overview of the company and its history. Share successes, such as high talent retention. Highlight the strengths of the business in this document to generate more interest.
Look for any potential red flags and address them prior to putting the business on the market. Review intellectual property, employee contracts, and all tax requirements. If any problems are noted, take time to fix them so a potential buyer won’t worry that they will need to take on this task.
Create a Sales Agreement
A detailed sales agreement must be in place before transferring ownership of a business. This document is necessary when a person is purchasing assets or stock, and an attorney should review the agreement to ensure nothing is left out and all information is accurate.
This document should detail all inventory to be included in the sale. Furthermore, it must name the buyer, the seller, and the business that will exchange hands.
Background details also need to appear in this agreement. The current owner must decide how much information they will share prior to closing and what level of access the buyer will receive.
Never leave out any assets or liabilities. Ensure the document includes information about any broker fees, adjustments, and more. Leaving out these details can result in problems once the sale is complete.
Determine the Value of the Business
Once all documents are in place so they can be shared with potential buyers, it is time to set an asking price for the business. Never take on this task without getting a professional valuation of the company. Many factors influence the price. Overlooking even one could lead to the owner asking too much for the company and not attracting buyers. On the other hand, they could ask too little and miss out on being fully paid for their hard work.
The business valuation expert takes many things into account when coming up with an asking price. This includes tax records for several years, inventory value, business equipment value, and more. However, they also take into account additional factors that aren’t tangible. For instance, they help business owners determine the value of their customer base and recent growth trends.
Once the process is complete, the owner can walk away knowing they did everything possible for a successful transition. If help is needed with any of the tasks associated with selling a business, the owner should reach out to professionals. This is one task where nothing should be left to chance. When the owner builds the right team to help with this task, they will find everything is covered. That’s the most important thing.