Running a business is a major commitment. Business owners often spend well more than 40 hours per week taking care of company needs. All of that hard work and personal sacrifice can pay off when a business owner sells the company to a competitor, an aspiring entrepreneur with financial backing or a power player in the local industry.
Business owners preparing for a sale transaction typically need to take appropriate steps to protect themselves and optimize the return on what could be the biggest single financial transaction of their lives.
Reviewing the company’s finances
Selling a business is a complex process that requires a thorough review of the company’s current circumstances. Performing an in-depth financial evaluation is typically a smart move. Owners need to identify company assets, determine what they are worth after factoring in depreciation and identify financial obligations as well. They may then be able to identify matters that they can address to increase the perceived value of the business.
Addressing liabilities
There are several details about a company that could serve as deterrents to potential buyers. An ongoing dispute with a former employee might give them pause. It may be necessary to fully resolve all pending legal issues before listing the business for sale. Debts can also influence which prospective buyers make an offer and how much they feel the company is worth. Whenever possible, resolving financial liabilities before listing a company can help optimize the sale price and increase overall interest in the organization.
Determining a fair price
To sell a company, the current owner must determine what it is worth. That process can be very complex, as there are a number of different valuation methods that can apply depending on the type of business. A business owner needs to know what the company is currently worth to determine what they should ask a buyer to pay for the company.
Preparing for transition
Even before listing the business for sale, the current owner may need to start taking steps to transition the company to new leadership. That process might involve succession planning to identify those who can step into a leadership role. It might involve speaking with key employees about the upcoming change and negotiating to ensure they intend to stay with the company. Owners may also need to stay on for months after the sale to train their replacements.
Those intending to sell a business may face a variety of unusual challenges and complications depending on the type of business, the function it serves and other details. Reviewing a potential business sale with a lawyer familiar with business law can help business owners protect themselves and the organizations that they run. Proper support can take a lot of the legwork and uncertainty out of a business sale transaction.