Selling Your Business? Answer These Questions First
By Andy Kocemba
Selling your business will be one of the most impactful events in your life, and it is important to take all the steps you can to ensure a positive outcome. But, without properly setting your priorities and understanding the factors involved, you might get to the end of the sale and realized you focused on the wrong things. Before you take those critical actions to prepare your business for sale, here are three quick questions to make sure your mind is in the right place.
- What is your primary goal? This might sound like a silly question, but there are many outcomes to consider when selling your business. The obvious is the sale price, but others include the terms of the deal (will you get cash up front or be paid over time), the future of your employees, and the legacy of your brand. There’s no right or wrong answer in determining your goals, but writing down all that you hope to accomplish in the sale of your business and assigning priority to each will serve you well as you enter negotiations with a buyer. Each of your goals is a bargaining chip, and you might have to give in one area to gain in another.
- What should you prepare? The key to getting what you want in negotiations with a buyer is having your business positioned as both profitable and easily transferred to a new owner. First and foremost, you want your financial statements and tax returns to be clear and orderly, documenting your profitability. If the profitability isn’t where you think it should be, do what you can to get your business running at its best. Additionally, think of all other aspects of your business that will increase buyer confidence that they can successfully run your business: clearly document your processes, make sure your reputation is solid (including all online and social media locations), even clean your physical location, equipment, and vehicles.
- What will you walk away with? When you sell your business, it’s not as simple as taking the purchase price in cash and heading to the beach. The first item you need to be clear on is how much of the purchase price is being paid at closing compared to how much you will be paid over time. On top of this, you will have certain fees paid from your proceeds at closing including paying the broker who put the deal together, paying any legal fees incurred, and paying off any loans you had against the business (remember, the buyer acquires everything free and clear). And, don’t forget your tax ramifications. This aspect can vary on a case by case basis, so it’s important for you to have a detailed discussion with your tax professional to gain a clear picture of what you will owe the government. Having a realistic expectation of the amount of money a sale will generate you will empower you to make smart decisions during the negotiation phase.
When you have confidently answered these three questions, you will be ready to start the sale process. From pre-sale preparation to post-sale investing, you will be clear in your direction and surprises will be limited. Remember, the answers will be unique to you, so be honest as you work through the thought process.
- Set your priorities and understand the factors involved with the sale of a business before beginning the process.
- Consider your goals when selling your business, and decide what's most important to you.
- Be honest with yourself when thinking through your direction and your goals.
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