Selling a business is an emotional and complex process. It involves a myriad of issues, such as the transfer of assets, intellectual property and employee contracts and the tax implications of both state and federal taxes. Before attempting to complete the process, it is essential that the owners have a full understanding of their obligations.
Conducting a business appraisal early on can help you determine the value of your company and establish expectations. This is a critical procedure that should be conducted by a professional, such as an expert in mergers and acquisitions or a business valuation expert.
The current economic climate and the expected trends in the industry can affect the value of your business. A rising economy could suggest that the time is right to sell, but the oversaturation of your market may lead you to wait until conditions improve. You should also consider whether you are emotionally ready to sell.
The main issue is how much of your personal stake in the company you are willing to forfeit. For example, if your daughter has been involved in the operation, it might be more important to you that she stays involved after the sale. Other factors might include your desire to keep family traditions or the level of recurring revenue in the business, which may make it easier for banks to finance debt and can boost the sales price.
Negotiations can begin when you have marketed and received interest in your business. Be prepared to look for creative solutions that can bridge the gap between your goals in negotiations and the buyer’s requirements, like ways to finance your business, earn-out arrangements and a possible ownership stake in the company.