There are many reasons why you may be thinking about selling your business soon. For example, you may be planning to retire within the next year. Perhaps you have another incredible business opportunity in mind, and you want to use the profits for the current sale to fund your new venture. These are only a few of the more common reasons why you may want to sell your business, but you may not be certain how to go about this process or if this is an intelligent decision to make.
These are some of the top factors to consider when you are thinking about selling your business.
Where to Sell the Business
If you are preparing to sell your business, you may first want to explore the marketplace and get a reasonable idea about what your operation may sell for or which other businesses are available for sale. There are several online business listings that you can turn to in order to learn more about the other listings on the market. You can also reach out to a business broker, check out CGK Business Sales for more tips on how to find a good business broker.
Keep in mind that there is a wide range of industries and niches. Many of the online listing platforms and business brokers specialize in a specific industry or niche. For example, a specialized broker may have a greater understanding of your business model and plan, and he or she may be able to better market your venture for sale to the right target audience.
If You Will Separate Different Departments or Lines
If you have a larger business with several different departments or lines, it may be cost-effective to separate these departments into several different and fully-functioning operations. This may take ample restructuring, but the ultimate return from this effort may be lucrative and well worthwhile. You can speak with your broker about the benefits of doing so several months or more before you actually decide to list your business for sale.
What Is Included in Your Sale
Whether you sell your business in parts or all together as a large, single unit, you should initially determine what will be included in the sale and what to avoid when making a contract. A business selling contract will outline all of the items included in the sale individually, and the description will usually be very detailed. A business sale contract, for example, may outline inventory and products, equipment, machines, vehicles, furnishings, office space and even business contracts, client records and more that will be sold.
You may initially only tally up the value of physical assets to determine what price you may sell your business for, but keep in mind that there is often far more value in a business than you may realize. Because the physical property is critical to determining value, however, it should be itemized as a first step in the process. In some cases, a business owner may wish to retain some of the items or to sell them individually.
If You Will Sell the Business Name
When you meet with contract lawyers, they will ask you if you intend to sell the business name. In many cases, the business name is well-known in a community or online, and it is essentially a critical element that determines the value of the business and the offer you may receive. If you have spent time developing the brand, you likely want to obtain compensation for your time and effort doing so.
However, if your business name is linked to your personal name, you may not want the reputation of your good name controlled by someone else. This is only one of many reasons why it may not be feasible to sell the business name with the business.
What Your Asking Price Is
Your sales broker can help you to determine a reasonable asking price for your business, but an appraisal or valuation of the business may be more useful. This is a well-researched report from a financial expert familiar with your industry, and the report can be provided to potential buyers or their financiers. You can also use this report to negotiate a higher sales price with an interested buyer.
While the final price in a business sale contract can be any amount that is agreed upon by both parties, the offer the buyer will make is commonly determined by analyzing the value of physical assets as well as reviewing historical and projected operating statements on the business. T
he cost of financing may also play a role in the sales price. After all, if interest rates rise dramatically, the business loan must still be affordable for the buyer to pay and must still be in line for returning a reasonable profit.
How to Get a Business Sale Contract
If you are ready to set up a business selling contract, you likely will work with contract lawyers. When you simply sell real estate, a standard real estate sales contract is used. However, because there are so many unique nuances and caveats when selling a business, lawyers with specialized experience in this area of business law should be contracted for service.
How Much Your Tax Liability Will Be
When you sell a business, you inevitably will be faced with a tax liability. This tax liability can be hefty in many cases, and you should speak with a financial expert to determine your liability well ahead of your tax due date. This can help you to properly prepare to make this large tax payment. Keep in mind that if you sell a portion of real estate in the transaction, you may be able to set up a 1031 tax deferred exchange to offset some of your liability.
Selling your business can be bittersweet. While you may feel solemn about giving up something that you have devoted so much time and energy to, you may be excited about pursuing new life opportunities. By focusing your attention on these points, you can better determine if now is the right time to sell your property and how to best go about the process for the best results.