Making a decision on when to sell can be difficult and emotional. For those of you that started a business from scratch or held it together during rough times, that decision will be even harder. Here are some basic thoughts to help you through the process.
Getting ready to sell
As with any item that is sold or bought, the first “appearance” is a lasting image, which is the same for a business as well. Getting all the financial information prepared to include full descriptions of all assets, earnings and information is the first step. If there is physical location involved, take time to do all the things you keep putting off doing. Fix it! Paint it! Repair it! All before you make the initial visit with any buyer.
Form a reasonable value for the business
Seeking some professional advise or a trusted banker can make a lot of difference in your attitude about selling. Most of us have some emotional stakes that need to be discussed. All those years of hard work do amount to something, but the something has to make since to a buyer too. If you envision your business like an old fashion milking stool with three legs your on the right track. One leg is the value you think it is. Usually it’s the longest (larger in value) leg; next, is the buyer, who will want to obtain the best deal they can and, finally, is the financing agency’s leg which is the real worlds ability to actually fund a sale. You have to get all three legs to be the same size or it will never sell.
Finding an agency and advertising the opportunity
Putting up a for-sale sign usually isn’t what everyone wants to do. It label’s the opportunity “going out of business” and that’s usually too far from the truth, but it does work to tell people your for sale. Keeping the sale confidential has some advantages so finding the right combination of help is up to you. They’re many agencies that abound with individuals who specialize in on-going-concern sales or are local brokers with local connections. Seek them out and ask them questions. See what they think the value is before you tell them what you already know. Look at their record of selling your type of business or their overall involvement in your community.
Finding a buyer and structuring deals
Information on this step comes later, but knowing what you will go thru is important. Know what due diligence is and how it will require your help is important. Know what the current bank requirements are for selling so that you’re prepared to accept reasonable offers that don’t waste your time.
What seems to work in offers
In today’s market for buying and selling, the main issue is always finding the capital and or loans to proceed. As a guide, most banks will not finance any of the “blue sky” in a deal so you, as a seller, should be prepared to carry back a portion of the price. Securing that loan is a concern because your liens will be behind primary lenders. You also should be aware of the post sale implications (tax) of the selling price. Check with your accountant before you agree to the price and terms.
Escrow and closing processes
It is always in your best interest to use a title company to close a business sale. They are a third party to any deal and will professionally handle the transfers of assets and bill of sales. Don’t do this one on your own.
Seeking legal or accounting advice
As with any contractual deal, having a legal advisor is recommended but try to control that issue. Asking a lawyer his or her opinion on values may be overstepping their bounds and will cost you money possibly unnecessary. Having an accountant tell you their opinion of the same is equally inappropriate. Use each within a defined request like drafting a note or contract for lawyers or a review of cash flows from an accountant is appropriate. Control the resources to your advantage.
Addition information available on the entire process can be obtained by calling Kip Moggridge at 208 336-8000 or firstname.lastname@example.org