Selling a business is usually the best exit strategy for most business owners. At times, even when setting up the business, it was always the goal of the investor to sell the business at a profit. Other times, selling the business becomes an option where there are no business successors. Whatever is the case, it is always a wise thing to take things slow if you want to sell business to liquidate your assets. In this post, we will focus on five tips that will help sell business at the right price.
Sell at the right time
More often than not, people sell business when they are going bankrupt or when they are ill or too old to continue running it. Though searching for a good business broker San Diego at this time is not a bad idea, this is not the best time to sell your business. If your goal has always been to sell your business, you need to sell it when it is still successful. When in a sober mind, with no stress dictating your decisions, this is the best time to ask for business valuation and find the right buyer. To sell business is the same as selling a house. You make the sale to pursue other opportunities.
Be clear of what you are selling
To sell business at the right price, you need to start by knowing what you are really selling. You need to account for all your assets and their actual value. You should also consider if you will be going for the asset sale or the share sale for your incorporated business. Business valuation is very important at this stage. If you are uncertain of your actions, work with business brokers.
Know what your business is worth
Just like a house, your business is worth as much it will fetch in your target market. Even so, it is critical that you determine the price prior to selling it. If to sell business will cost you more than running it, then selling it will not be a viable option. Make use of various valuation methods. They range from asset-based to the future earnings approach. Again, a business broker San Diego will help with this step.
Get your house in order
You do not want to be the one delaying things once your find someone to sell business to. The important thing is to get everything in order. Have all the documents relating to your business in hand and also compile a list of all your assets. If you have any interest in running the business, now is the time to conclude things before you sell it. Reduce your liabilities too as they will affect the selling price.
Get the right professional help
If you were to get one piece of advice when you sell business, it would be seeking professional help. The process is complex and if handled poorly, you might end up suffering. Talk to reputable business brokers and work with them from the first to the last day.
To sell business, it is important that you get all the necessary information for buyers to review. It is how prepared you are that determines whether you will sell at a profit or at a loss. Though selling a business on your own is a good thing, it is not recommended especially where you are doing so for the first time. To sell business, you need to work with business brokers, lawyers as well as business valuation experts. Today, a good business broker San Diego will help find the right professionals to work with. In this article, however, we will look at some of the documents you need to get ready for showing to potential buyers.
Most private businesses are run in a way to minimize tax liabilities. The downside is the same operating technique can bring down the value of a business. Though it is possible to reconstruct the required financial statements, the process may force you to pay back the income taxes as well as penalties. With that said, if you have always wanted to sell business at a certain time, you need to make the necessary accounting changes in advance. Prepare financial statements as well as other necessary documents the buyers will want to review. You should include:
- A complete balance sheet
- Income statement
- Valuation report
The key reason why in addition to working with business brokers you should hire an attorney is because of the legal issues pertaining to the firm. To sell business, you will need basic business operating documents like:
- Articles of incorporation
- Supplier agreements
- Partnership agreements
- Franchise agreements to data on the regulatory requirements
- Documents on all pending legal actions
- Lease terms
- Stock status
Considering you will sell business to intelligent buyers, you will need to get marketing information ready for them to review. This information will include:
- Marketing expenditures
- Business’ chief market area
- Market share
- Product line information
Intelligent buyers will want to know if your products are proprietary or potentially valuable new products in the market. Buyers will also want to see descriptions of customer demographics, pricing strategies and competition.
Another important piece of information you will need to provide is that on the various aspects of your daily operations. This ranges from company policies to personnel listings to historic hours of operation. You should include:
- Organizational charts
- Job descriptions
- Employee benefits
- Pay rates
- Presence or absence of employee unions
Once you have set all the details and documents, you need to organize them in a comprehensive presentation package. These are the details that will influence how much you sell business. A complete presentation package should include:
- Business history
- Description of the business operations
- Description of the physical facilities
- Discussion of the suppliers and agreements
- Review of the historical and current marketing practices
- A description of the competition
- Coverage of employee and personnel issues
- Owners identification
- Description of the business’ insurance coverage
- Description of current and pending legal issues or any contingent liabilities
- Financial statements for the last 3 to 5 years
The presentation package is necessary if you want to sell business at the right price and to the right people. To avoid guesswork, work with a business broker San Diego every step of the way.
Annually, over 700,000 businesses are sold in the United States alone. Most are small and mid-sized businesses. Though selling a business is a common thing, not every seller gets to enjoy their firm’s full worth. Some end up being taken advantage of while others manage to sell their business for more than the actual value. The latter is more attractive, right? To sell business at a profit, it is critical that you involve the right professionals and follow the right steps.
Determine a price range
The first thing you need to do once you decide to sell business is to get a realistic price range. If the range is too high, you might never get a buyer and if it is too low, you will risk selling it at the bargain basement discount. Pricing your business is both an art as well as a science. There are many business valuation methods you can use. However, for the most accurate figures, work with a valuator or with experienced business brokers.
Look at the tax consequences
When you sell business, the money you get for it will be taxed. It is important to know how much you will be taxed and look for possible ways to mitigate the tax bite. Work with a tax expert. There are two main factors that will affect your tax bill:
- The legal setup of your business (LLC or corporation)
- If you are selling the entity or assets
Taxes can be quite complicated. Work hand in hand with an experienced business broker San Diego when you sell your business.
Prepare for sale
Just like selling a house, you need to make your business attractive to buyers. Make everything both orderly and attractive. Reducing your liabilities will also help. Clear all outstanding loans if you can.
If your brand is well known, it will be easy to sell business. Word will get out. However, if you are not well known, you have to advertise yourself. You will need to put ads in the newspaper, trade publications, and business sale websites and so on. Working with business brokers will also be perfect.
Once the word is out and your business is attractive enough, you will receive many deals. The wise thing is not to commit to the first offer you get. Take as many offers as you can. You should then come up with the terms of the sale and start negotiating.
Sign sales agreement
Your terms of sale have to be put in writing. The terms should list all your assets and the value for the assets. This information will be used in taxation.
Plan for closing
When planning for closing, you need to make a checklist of all the things you will need to sell business. They include:
- Asset allocation statement
- Alarm codes, safe combinations and computer access codes
- Cashier’s check
- Employment contracts
- Customer lists
- Supplier lists
- Security agreement
- Statement regarding the absence of creditors
- And so on
File with IRS
The last step you will have to take to sell business is to file the paperwork with the revenue services.
The selling price of a business is influenced both by the external economic forces and the internal financial performances of the business. These are the factors that should tell you whether to put your firm on the market or to hold back. With over 700,000 businesses being sold each year, it is important to take your time when it comes to the sale. If the timing is wrong, you will not be able to sell business at the best price. Your negotiating power will be reduced. In this post, we will focus on the three factors you should pay close attention to before you sell business.
- Performance history of the company
The most important factor in determining how much to sell business is probably the financial performance and the history of the firm in question. If you are a business owner who chooses to sell your company after several years of unswerving growth, you will not have any trouble commanding a higher price. On the other hand, if your business has not been performing well in the past year or two, even if your business’ niche is booming, you will have trouble selling the business at a good price. The best time to sell business at a good profit is when it is performing well
- Business environment
Another important factor that will affect the cost of your business is the state of the business environment your company operates in. If the industry your business operates in is experiencing a downturn, you will have trouble getting the best price for it. If you can, delay the sale and sell business when the industry gets into a more robust cycle. At this time, you will be able to command a better deal.
However, if you are not able to hold on within the tide of the turmoil, it is important to work with a reliable business broker San Diego. The broker will help find the best buyer who will offer the best price for your company before the industry deteriorates any further.
- Stock market
The stock market matters a lot. When planning to sell business, it is important that you analyze the stock market keenly. The stock market trends and averages not only reflect on the health of national economy but also on projected market conditions. The perceived wellbeing of the economy has a huge part to play on capital appropriations, contraction moves, service and product introduction as well as the expansion decisions of corporates. The nature of the stock market is what will determine if you will sell business at a profit or loss.
There are many more factors that ought to be considered in the sale of a business. The important thing to do is to get the right professional help. You need to work with a lawyer, business valuation expert and a business broker San Diego. The experts will advise you accordingly and ensure you make informed choices and get the best results as you sell business.
Selling a business is a good option if you want to pursue other opportunities and make a profit from your investment. This is the fastest way to liquidate your assets. Even so, it is important to understand that selling a business is a serious business. The last thing you should do is in a hurry to find the right buyer. The sale requires careful preparation and the hiring of the right professional help. So, if you have this question: whom should I hire to sell my business, then this article will come in handy.
How do I sell my business at the best price?
To sell business at the best price, it is critical that you involve the right professionals. There are three main professionals you will need to work with in the sale of your business.
If you are wondering, ‘how do I sell my business at the right price’, the first thing you must do is get the actual value of your business. You will need to look at your current assets using such methods as the future earnings approaches and the asset based approaches. Needless to say, this is not an easy thing and if done poorly, you might sell business at a loss or have nobody to buy it to. It is at this stage that you need to hire a professional in business valuation.
A professional valuator will look at every aspect of your business and make considered conclusions. He will help identify the real worth of your firm. The valuation of the expert will also be more credible to potential buyers. Therefore, the moment the idea of ‘I want to sell my business’ crosses your mind, talk to a valuator first.
Most people who say, ‘I want to sell my business’, are often doing it for the first time. If the case applies to you, you need to understand that selling a business is not as easy as painted on online forums or as discussed in conferences. It involves working hard to find the right buyer and negotiating for the best price. This is what makes business brokers important. A business broker San Diego is also referred to as a commercial realtor. He will help find the best buyers, determine the best deal, and help navigate the sale process and also help you close fast. The broker will get the heavy burden off your shoulders.
Last but not least, you will require legal counsel. The last thing you want is to contradict yourself or violate the laws regarding the sale of a business in San Diego. A good lawyer will help draw up and review the necessary documents needed to sell your house.
There is a lot that goes into the sale of a business. If you think, ‘I want to sell my business,’ you should involve the these people. A business broker will also many time have valuation experience. At So-Cal Business Brokers we do. It does not matter how small or big your business is. Call us today for help with selling your business.