So you’re an owner figuring out how to sell your business…overwhelmed? Don’t worry, that’s normal.
Selling a business can be a complex and frustrating task if you don’t spend a little bit of time gathering the right information and consulting the experts early on.
These steps will help you get clear on the process so that you can (hopefully) bank the highest profits possible.
Determine a Realistic Value and Price Range
How much is your business worth right now and how much profit can you make?
This will depend on a number of factors including:
- Why you are selling your business
- External economic influences
- The size and structure of your business
- The overall strength of your business (versus industry benchmarks)
A qualified business appraiser will be your best bet to determine how you want to value your business.
Get your appraiser, accountant, and lawyer to work through the numbers and assess the business as early as possible.
Understanding the reasons behind your pricing, and making sure that everything is in line will help both parties through negotiations.
Any scrupulous buyer will do a thorough investigation through the due diligence process to understand why you priced it as you did.
Get Clear on Taxes & Operating Expenses
When looking into how to sell your business, there are a number of factors to consider.
Generally, you can expect to pay a fair amount of taxes on the profit that you make, but depending on the nature and type of your business, you may be able to reallocate some assets.
Specifically, capital assets can be treated as capital gains which means taxes will be lower.
Depreciation and other deductions, losses, and liabilities need to be investigated. Do this far ahead of time with a qualified CPA because how you allocate assets could affect your sale price and taxes.
Look Good for a Sale
You wouldn’t try to sell a home without staging it and gathering the numbers — the same is true with a business.
All equipment and other assets being sold as part of the business should be updated and repaired pre-sale, and your assets and liabilities should be clearly laid out for potential buyers.
Pull together a few years of tax returns and work through them in detail with your accountant. They will be able to guide you towards the best course of action to do with regards to equipment and supplies, as well as anything you are in a lease with.
Seek Potential Buyers
Learning how to sell your business is just as much about marketing as it is making sure important numbers are accounted for.
While you market it you can get care for yourself why you are selling the business and why it’s priced as it is.
Be prepared to spend up to a couple of years preparing for a sale, finding a few solid prospective buyers, and moving through the transfer process.
Stick with tried and true methods of advertising and definitely try to find people who seem to be a good fit (e.g.: not just $).
Try to get in touch with more than one possible buyer and learn more about how they qualify for financing.
In addition, you’ll want to have non-disclosure agreements at-the-ready for the purposes of discussing details with buyers.
Negotiate Your Deal
Negotiations are a normal part of business transactions. Both the buyer and seller should be aware of the reasons why the price may move around and how this impacts them.
If you’ve packaged and structured your deal well, there shouldn’t be any surprises or loose ends to make this part of the process unusually long.
But do stand firm on a bottom price as established with your appraiser.
Sign a Business Purchase Agreement
The business purchase agreement or business transfer agreement will likely involve several documents, including:
- A bill of sale
- A security agreement
- Documents pertaining to a lease
- Real estate purchase
- Business plan
- Partnership contracts
- Assets and liabilities
The purpose is to ensure that both sides are aware of all details before they sign.
Your business lawyer will help you to prepare these documents and make sure that they are legally binding.
File Paperwork With the IRS
Learning how to sell your business and closing the sale will not be too complex, but it’s not over until you have related taxes filed properly with the IRS.
Getting your paperwork in order ahead of time and consulting a skilled accountant should help you to understand how you will claim the taxes on the sale — don’t leave this step hanging.
Close Up Shop
Finalizing the sale and moving forward can be challenging emotionally, but hopefully, you’ve had enough support and clarity through the process that you can move into your next venture or just take a well-deserved break.
Want to sell your business? Don’t move ahead without expert help. We’ll walk you through the process and help you make the most of the sale.
Call 303-780-7333 or schedule an appointment for a free consultation.
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