When it comes to the sale of a business, the worry that every seller has is that on getting paid in full. There are many scammers out there and they are getting more intelligent by the day. Even so, this does not mean you can’t sell business. In addition to considering the option of working with business brokers in San Diego, there are a couple of strategies you can use to make sure you get paid.
Cash on completion
The obvious way to avoid loss of future payments as you sell business is simply not to have any. It is possible to sell your business for cash. When you do this, you will never need to worry about defaults because you will only hand over the business to the next owner when he pays in full. All in all, this option has some downsides. The major problem is you might have trouble finding a buyer who will pay you in full. You may also be forced to lower the selling price.
This is the most common strategy used when selling a business. With this option, the new director of the business will be held liable for outstanding debts. If there is a default in payment, you can attempt to get it from the director. The problem facing this method is that it can be inflammatory to request guarantee from directors when negotiating. All in all, if you are able to negotiate director’s guarantee, then this is probably the best method to use when you sell business. The method forces the manager to focus on making sure you are paid.
Before you close the deal, you can secure future payment on specific assets or registering a debenture. By so doing, you will always be higher on the queue if the company gets into trouble and there is money available to distribute.
To be on the safe side as you sell business, you need to judge the creditworthiness of the new buyer. A good business broker San Diego will help with this step. You don’t want to lend business to a person or company that is known for not paying their debts. Some areas you can consider from the buyer are:
- How long their business has been running
- Whether the directors have had any difficulties before especially when it comes to clearing debts
- How profitable the company buying your business is
- The assets of the company buying your firm
Add claw-back clauses
The important thing to do before you sell business is to give the buyer no room for default. You can do this by adding a clause in the sale agreement which enables you to claw back shares if the buyer defaults payments.
All the above tips will help sell business without the fear of not getting paid in the end. However, before you choose an option, you have to liaise with business brokers and also get the right balance. Weigh the options in each payment method and choose the one that is most foolproof.