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Labor Day: Time to Stop Working?
Before you cash in on the successful company you've built, take the time to adequately prepare for this important goal. Whatever your motivation for selling your business, the effort you put into preparing for its sale can mean a big difference in the final result, according to the Pennsylvania Institute of Certified Public Accountants.
Begin with a realistic view of the value of your business. For an initial ballpark estimate, investigate the selling prices of similar businesses in your area. Be aware, the values of even seemingly comparable businesses can vary greatly.
A good option here may be to hire a professional business valuation expert to make this determination. Factors that will affect the ultimate sales price include past revenues, the value of your business assets, the company's future prospects and the health of the local business economy.
Keep in mind that prospective buyers will perform their own valuation of your business, and you will be in a better negotiating position if you have your own objective sense of what it's worth. If you find out that your business is worth much less or much more than you expected, you may reconsider your decision to sell or revise your future plans.
Don't forget to explore the tax consequences of your selling options with a CPA before you sign the letter of intent to sell with an interested buyer. If you wait until after signing the intent to sell, you may overlook tax-saving opportunities.
Once you have an idea of value, create a profile of the buyer who would benefit most from purchasing your business, and target them. Perhaps a large local company in the same industry would be interested in your location, customer relationships, or some other valuable aspect of your operation.
Maybe a long time competitor would relish the chance to expand. Perhaps one or more of your own employees would be interested in ownership. Once you've identified the most promising potential buyers, you'll be better able to focus your sales efforts.
Prospective buyers will ask a lot of questions about your company's finances, products or services, staff, customers, vendors, facilities, among other aspects of the business. Being prepared with the correct facts and figures will help smooth the process.
Clear and Positive Picture
At a minimum, you should have five years of recent financial statements ready, including balance sheets and profit and loss statements. Make an effort to present an appealing picture to prospective buyers. Even though you are selling, be sure to maintain all the elements that originally earned your company its good reputation.
Before you decide to sell, consider what kind of future participation you'd like to have in the business. Many owners want to continue to be involved, even after they have passed on the reins to new management.
In other cases, the new owners ask for continued participation to ensure a smooth transition. Establish in writing what the outgoing owner's role will be, including any continuing financial interest in the business.
Selling a business is a complex process that carries tax and financial implications. Make sure you have a business expert in finances to help you.