What To Expect When Selling Your Business
The process of selling your business can be long and arduous, or it can be smooth and simple. You never know what to expect when you join forces with a third party that is coming into the fold. What should you do? What shouldn’t you do? How does this all work out in the end? These are some questions that may go through your mind as you sign documents to sell your business.
First things first: Change your mindset about the way you look at your company. If possible, start looking for ways to decrease costs throughout the course of the sale; hire employees who are capable of taking on more tasks than they currently do, cut down on equipment upgrade needs, anything that will bring down overhead costs, essentially. Remember, to a business buyer, the most important thing is the bottom line; how much money did this company make last year and can we expect that trend to continue? If you want your company to sell successfully, then you need to show that it’s making money.
Then comes assembling all of your assets and recent financial statements. This means placing together all pertinent documents such as copies of tax returns from the past five years, inventory records for anything significant (you will need recent counts), and any other essential information like what software programs are in use at the moment or if there are any contracts under which the business relies on very heavily for income generation.
You never know who will be showing interest in buying your company, but generally, it tends to be a fairly small group. If you’re selling your company before it shows promise of becoming something even bigger, then it’s best to prepare for the worst and assume that you’ll only have one or two companies showing interest. You can’t tell who is viewing your information behind closed doors, so don’t play mind games with yourself about figuring out how many people are looking over your documents or if they are really interested in buying or if they are just window-shopping. If they aren’t interested, let them know as soon as possible because wasting everyone’s time is not fun!
When you get to the part of actually negotiating a price, it’s best not to do it alone. Get an agent! It is their job after all and they are perfectly qualified for helping you negotiate with business buyers who will drive up prices during this period. Other than that, make sure you’re firm on the bottom line and don’t let yourself be guilted into paying more money than necessary out of your pocket. This is the time when most people end up overspending. Negotiating can be difficult especially if you’re emotional about selling; try to keep cool and skip the drama because, in business, emotions mean nothing; only money matters. A good thing about having an agent involved though is that they will back you up in this area.
The next step is signing the contract but this may take a while, especially if everyone involved in it has full schedules to meet with advisors and lawyers. The only thing that may speed up the process is if one party needs to get out of their previous contract due to financial obligation for instance, so if you can find an honest business buyer who isn’t afraid to be straight-forward about what they need, then your purchase could get wrapped up faster than usual.
By now you will probably have received some money from the business buyer; maybe not all of it until the title transfers material possession rights over the company, but hopefully at least enough for you to relax a little before having everything finalized.
Once an offer is finally made on the table, there will be some negotiations here and there over price, financing options (if any), timetables for closing, and so on. It would be prudent for you to hire an agent who specializes in making the sale of a business successful, especially if you’ve never sold one before. Your agent can help take care of these negotiations so that you don’t have to stress too much over anything.
Over time, expect things to become more complicated than they should be when it comes time to sign over the company’s legal rights. Read every line in every contract you are considering signing very carefully; this is your life here!
Selling your company is not easy – but it always seems like the end result will justify any cost or headache involved as you go through this process. So long as your expectations are realistic and reasonable, then everything else will fall into place quite easily.
The process of selling your business can be long and arduous, or it can be smooth and simple. You never know what to expect when you join forces with a third party that is coming into the fold. What should you do? What shouldn’t you do? How does this all work out in the end?…