Some people start a business with the primary objective of eventually putting the organization up for sale. Creating a profitable home healthcare company or local IT support organization can produce not just short-term income for the entrepreneur but also a sizable future payout if the owner can sell the company for what it is actually worth.
Someone looking for a turnkey business opportunity or a company hoping to dominate the local market might want to buy an established business. The proceeds from a business sale might be the main investment capital that someone has for their next business venture or might be what they rely on for financial stability during retirement.
How can someone prepare to sell a business to optimize their protection and profit from the transaction?
They need to properly value the business
Perhaps the most important consideration when preparing to sell a business is the act of determining what value the company represents. Business valuation looks at the fair market value of company assets and the likely future revenue that the company will generate. An accurate valuation will help someone convince a potential buyer or investor that the transaction is a beneficial one and will make it easier for someone to avoid lowball offers that will deprive them of the true value of the organization they helped start.
They need to lock in key supports
A business is only as good as its staffing roster and contracts with clients. Many of those relationships will suffer when someone sells their business to an outside party. Employees may leave the company because they fear the possible future loss of their position, while loyal customers or clients may take their business elsewhere after a surprise change of ownership or management. Locking in key talent and extending client contracts can help make a business more attractive. Business owners may also want to settle certain debts, close certain accounts and otherwise minimize business liabilities as they prepare to list their company for sale.
Those intending to sell a business will also want to protect themselves very carefully with regard to the legal documents used for the transaction, including the disclosures they provide about assets and company operations. They may need to offer transition support for the new owner to ensure they can assume control over the business with minimal disruption. This is where seeking legal guidance is often key to the success of a transaction.
Ultimately, knowing how to handle a business sale can make it easier for an individual to profit off of an organization that they have invested much time and resources to develop.
