A Review of Vital Steps for Selling a Business
By Space Coast Daily // January 15, 2021
Business owners may want to sell their company and step aside for a new owner. When business owners make this decision, they will need help to prepare for the sale and to get all their documentation in order. Selling a company is not a simple task, and a broker could guide the business owner through the process.
The business owner starts with their purpose for selling and presents details about the company’s products and earning potential. Buyers want a profitable company that presents a sound investment. Business owners start the process by reviewing vital steps for selling a company.
Hire a Broker to Help You Sell
A broker provides assistance for company owners preparing to sell their companies. They understand how to present the company to prospective buyers and what documents the business owner needs to present to possible buyers. Business owners can learn more about working with a broker by contacting CGK Business Sales right now.
Get a Comprehensive Valuation for the Company
A comprehensive valuation presents the business owner with the exact value of their company according to the profits it is generating and the assets that come with the business.
When appraising the company, the appraiser must review all real estate, equipment, machinery, and other assets owned by the company. The earning capacity of the company plays a role in the business valuation formula, and a more profitable company is more appealing to potential buyers.
Create Three-Years’ Worth of Financial Records and Tax Returns
It’s vital to get at least three years’ worth of tax returns and financial records together when preparing to sell the business. Buyers want to research the company’s financial records and ensure the company has been and still is profitable.
They do not want to purchase a company in financial trouble that won’t give them a worthwhile investment.
Typically, companies that are in financial ruin are stripped down and sold piece by piece to generate the most profits. This is not the best opportunity for investors that want to take over a profitable business that will continue to grow and prosper.
Define the Reason for Selling the Company
The company owner must establish their reason for selling the company. For example, if the business owner is ready to retire and doesn’t have any heirs, the sale of the business gives them a one-time purchase price that will support them for the rest of their lives.
They sell the company to someone who wants to continue running it and taking care of the workers that have been dedicated to the business throughout the years. If the business is in trouble, the business owner is just trying to get as much as they can from a failing venture, and this could present them with some difficulties.
Review Exit Strategies for Leaving the Company
The business owner must review an exit strategy for leaving the company and allowing it to continue to operate. With some business sales, the owner works with the buyer through a transitional period. It allows the new owner to take over and work with the existing workers.
When the new owner wants to create new policies for the business, the seller can help them transition the employees to the new policies and new ways of operating the business. Once the transition period is over, the seller can remove themselves from the business and go on with their lives.
Set Up Better Strategies for Increasing Sales Volumes
The business owner must increase the sales volume before placing the business on the market. This may involve releasing a new product or boosting sales for their existing products. Advertising and marketing efforts can increase sales by showcasing the company’s best products and presenting them to the target demographic.
When reviewing opportunities, the business owner needs to create a new plan for new products that are proven to be profitable. These new strategies must increase sales volumes and give the company greater success.
When reviewing the company, buyers will want to see what the company plans to do moving forward, and the upcoming strategies must generate higher profits.
Work with Qualified Buyers Only
The broker works with buyers who have an interest in the company. They must prequalify for financing to purchase the company or present financial statements showing they have the capital to complete the purchase.
Brokers do not present offers to the business owner unless the buyer has qualified for financing or has the money to purchase the company.
When the buyer is ready, the broker can present their offer to the seller and negotiate with the business owner to set up the sale of their business. The broker explains all the requirements for the buyer when the seller accepts their offer.
Define the Terms of the Sales Contract
The terms of the sales contract define the responsibilities of all parties involved in the business transaction. The business owner can add clauses that protect their existing workers and define terms that the new owner must follow.
For example, if the business has a staff that has been invaluable for many years, the business owner may require the new owner to keep the staff on, and they will establish terms for terminating the workers.
The contract also explains what parties are responsible for specific costs during the closing. The title company provides a new deed for the business, and all assets are transferred to the new owner during the closing.
Business owners must follow critical steps when preparing to sell their company. Most brokers recommend starting the process at least two years ahead of time to avoid any issues that may arise.
The exact reason for selling the business must be discussed with a broker, and some business owners will need to complete a transition period with the new owner.
When preparing to sell, the business owner must show how profitable their company is and why a buyer would want to purchase it and continue operations. Business owners get help with the process through brokers that understand the entire process.