The prevailing conditions of a pandemic, or a prolonged phase of degrowth may prompt you to sell your business.
But when the time comes, are you prepared to take all the appropriate steps? The thought and planning for the sale of your business can be unsettling. It is okay not to be aware of what to do. Seldom do people have such ideas about where to begin while undertaking such a task.
Getting to an early start while planning for the sales can help make the deal effortless and profitable.
Before the Sale
When you start the process, a key consideration can be the identification of long-term objectives and not losing the focus on the current step. If otherwise, it can result in creating short-term decisions that can impact the ultimate plan.
Getting the finances in order is the first step towards an organized effort. You can prepare financial statements, chart key industry metrics, and projections. You can comprehend the numbers to make meaningful takeaways.
What are your outstanding liabilities? How’s the financial health of your business? What is the relative growth in net income and gross sales? What are the customer base and their relative ticket sizes? How does it all shape concerning your future projections?
Therefore it makes more sense to start early to make the necessary adjustments. You can perhaps choose to use the surplus cash, if any, to cash out minority shareholders, pay down debt, or refinance.
Incomplete or messy books can kill the deal even before it starts to take shape. A good idea can be to seek outside help from auditors, which can also help bolster buyer confidence.
Assemble an Advisory Team
It often happens that people who are selling their business do not have any idea about the process. A trusted team of advisors like Website Closers around you is vital. As you have only one shot at this, their expertise can be of special aid.
Such business advisory teams often have tax advisors, M&A experts, business brokers, accountants, investment bankers, and transaction attorneys. While undertaking such a transaction, it is also important to include CPA or tax advisors, who can give due weightage for personal advisory.
Such deals involve a lot of complexities. It can include
- Structure of the deal,
- Cash flow planning post-closure,
- Key Employee Retention ways,
- Tax planning, and
- Many other factors.
Therefore it necessitates the requirement of experts who can aid you to navigate your options.
A valuation specialist can help ascertain the present market worth of the business. You can reach out to an investment banker, business broker, or valuation expert for the same. While evaluating how to sell the business, enquire how much buyers are willing to pay for it?
A great way to gauge the situation can be to consider various sale structures-led different estimated valuations. The valuation can vary depending on the method opted for selling. A business, sold directly to the competition, can value way higher, compared to using employee stock ownership plans or ESOPs. Likewise, a full acquisition will be preferable to a part stake dilution of the non-controlling shares.
Therefore considering the deal structure and assigning due credit to it can help you fetch a better valuation.
Before rolling the dice to explore the ways and means to sell your business, set a goal for the transaction. Do you intend to pass on the business to employees or family members? Will you work for a period post selling the business? How crucial is it for you to make the brand survive? What are your financial needs?
Website closers or your advisors can guide you in selling the business in numerous ways. But if not aligned to your objective, it completely defeats the purpose. You can take stock of your needs and desires before you start getting wooed by complex deal structures and enticing tax reduction strategies.
During the Sale
A deal can often take, typically between three to twelve months, to reach its maturity. Being patient during this time is the key, as a lot of things can go wrong. So being cautious of not mentally retiring before achieving the end goal or pre-spending the forecasted proceeds is crucial. You can choose to
- Sign a non-disclosure agreement with your potential buyer
- Not disclose more than you actually need to
- Have a letter of intent or LOI, which is non-binding but outlines the proposed deal terms
- Square off the deal quickly, changes in any matrix can kill the deal
- Discuss the tax implications due to differing deal structures
So there are a host of factors that you can keep in mind while planning to sell your business. Since this is not a regular job that you do every day or have the possibility of doing again soon, you can seek professional help from website closers or advisors.