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.