Business owners typically choose to sell their businesses for many reasons, from profiting financially to pursuing other business ventures or even retiring. Except in more extreme circumstances, the decision to sell your business should not be made hastily. Here are 5 important factors when selling a business that can help determine who you choose to sell your business to as well as the conditions of the sale.
5 Important Factors When Selling a Business
Consider all your assets – Your business likely has assets you may not aware of, such as social media history, customer lists, website domains, vendor relationships and seasoned employees may be considered assets when selling your business. Rather than selling your business as a whole, consider an asset sale. If you own the space the business operates in, you must also consider whether to sell it as an asset or retain ownership and then collect rent from the new owner.
Your employees – Among the important factors when selling a business, don’t neglect the value of your employees. If you have valuable long-term employees working in your business, you may want to provide job security for them in the event of a sale. Additionally, employees that you have trained and now have successful on-the-job experience may be considered an asset when selling your business. And don’t forget to look to employees first when considering to sell the business. You may have an employee that knows the business inside-out and backwards that would be willing to purchase it from you it they can secure financing. This is where partnering with a funding agent like Elan Capital can benefit you.
Selling price – Once you’ve looked at annual earnings, growth potential and business assets you can begin to establish a selling price. This is where having a business broker comes in handy. If you have accrued debt while purchasing equipment or other items for the business, you may want to consider whether you wish to sell those items separately to ensure the debt is paid. You will need to analyze your business and the amount of taxes that must be paid in the event of a sale. Small-business owners face taxes upon the sale of a business, which may greatly reduce profits. You may need find ways to structure the sale to reduce the amount of taxes and increase your profits.
Agreements – Some business owners want to opt out of the day-to-day operations of a business but still retain a position as a consultant to help with the transition and ensure that the business continues to thrive. You must determine whether you will serve as a consultant for free as part of the sale, or earn an agreed upon salary. It is important to draw up an agreement that addresses these terms when selling a business. In addition, a buyer may ask you to sign a non-compete agreement promising that you will not open a competing business or begin working for an established competitor after selling your business. Again, this is why it’s important to partner with Elan, when drafting an agreement.
One in a lifetime – Whatever road brings you to the point of selling your business, the sale of your business will be one of the most significant actions that you will take in your life. Unlike the day-to-day decisions you make while running your business, selling your business it is an action you will take only once. You get a one single chance to put a price tag on years (or decades) of your efforts, and once you sign the sales documents, it’s over and done with.
Before moving forward with the sale, it is important that you understand the all steps and processes involved. Taking the time to determine what you want from the sale, planning carefully, obtaining professional advice from Elan Capital, and negotiating a satisfactory price and acceptable terms will help make the sale a once in a lifetime success.
Remember, even if you think you may be many years away from selling your business, you should consider who your successors are and what you would have to do should you died unexpectedly. If you don’t have a workable exit strategy in place, your heirs may have no choice but to liquidate the business and sell off the assets, getting nothing for the one true asset, the years of goodwill you have worked so hard for.
Elan Capital Inc. can provide critical support to individuals who are typically going through the sale process for the first and only time.
Questions? Give us a call. 888.615.1418