Private: Business buying and selling tips
Buying and selling a business is a complex business activity that involves several considerations. You may need to use intermediaries, various licensed consultants, accountants and/or lawyers or professionals in various fields to assist in handling different professional areas. The value of the business will depend on the reasons for the sale, the timing of the sale, the operating strength of the business and its growth potential.
The process of buying and selling a business takes a lot of time, and when it comes to confirming that you need to sell your business, here are some important points to keep in mind.
key takeaways
Selling your business starts with identifying your why, making sure your business is in the condition it needs to sell and when to sell it, and timing it when it matters.
If you want to truly reflect the value of the business, you must prepare for the sale of the business at least a year or more in advance, because the buyer needs sufficient financial records, customer profile records and other evidence of business success as a reason for determining the intended price .
Determine your business value so you can price it appropriately. You may consider hiring a valuation expert to assess the value, and AGPS can make an initial assessment of the value from a buyer’s perspective.
Decide whether you need to negotiate with an intermediary or negotiate the sale yourself.
Organize your financial statements and tax returns from years ago and review the details with an accountant.
Finding a buyer is a daunting task that can take years. Once you find a good buyer, you need to take your time and keep the process running smoothly.
How to sell your business
Reviewing these seven dos and don’ts can help you develop a solid plan and make your negotiations successful.
The reason for the sale
Why did you decide to sell your business? This is one of the first questions a potential buyer will ask.
Owners typically sell their business for any of the following reasons:
retire
Immigrate overseas
Partner or shareholder disputes
sick or dead
Overworked
change life style
develop other business
Some bosses consider selling the business when it’s not profitable, but that would make it harder to attract buyers.
There are many elements that can make your business look more attractive, including:
increase profit
income stability
strong customer base
A major multi-year contract
Systematic business model
Build reputation and goodwill
- Time of sale
Prepare for the sale as early as possible, preferably a year or two in advance. Preparations will help you improve your financial records, business structure and customer base, making your business foundation more stable and sustainable. These improvements will simplify the transition for the buyer and keep the business running smoothly. - Business Valuation
Next, you need to determine the value of your business to make sure you don’t price it too high or too low. Some industrialists will ask a valuation expert to do a valuation, and the valuation expert will give a detailed explanation of the value of the business. This document will bring credibility to the asking price and serve as a measure of your listing price. AGPS will provide you with the inertia and benchmark of bidding from the buyer’s point of view as a preliminary evaluation value, so that you can understand the market’s actual view of your business and the approximate value level. - Should you use an intermediary?
Selling your business yourself allows you to avoid paying junket commissions. When selling to a trusted family member or current employee, this is a less expensive and manageable route to credit risk.
In other cases, an intermediary can help you focus on your business to keep it running, sell with the highest level of secrecy and get a higher price. Discuss the buyer’s expectations with the intermediary and maintain continuous communication, and the intermediary will assist in finding a suitable buyer to take over.
- Prepare documents
Collect financial statements and tax returns for up to three to four years in the past and review them with an accountant. Also, make a list of equipment to be sold with the industry. Also, create a list of contacts related to sales transactions and supplies, and dig up any relevant paperwork, such as your current lease. Create copies of these documents for distribution to potential buyers who meet expectations. - Find buyers
Selling a property can take anywhere from six months to two years. Finding the right buyer can be a challenge.
Once you have a potential buyer, here’s how to keep the process going:
Get two or three potential buyers in case the initial deal falls through.
Keep in touch with potential buyers.
Before providing information about your business, find out whether a potential buyer has the ability (financial and/or operational) to take over the business and to pay the selling price.
Leave some room for negotiation, but stick to a reasonable price and consider the future value of the company.
enter into any agreement in writing. Potential buyers should sign a nondisclosure agreement to protect the information you provide.
After the sale you may encounter the following documents:
Documents related to the transfer of business assets to the buyer
assignment of lease
Warranty Agreement, Seller Retains Lien on Property
In addition, the buyer may have you sign a non-compete agreement in which you agree not to start new business of the same type or form a competition and attract customers.
Intermediaries typically charge an average of 10% on properties sold; while this may seem a bit high, intermediaries can also negotiate a deal that is better for you than a deal you arrange yourself.
- Handling Profits
Take some time – at least a few months – to process and arrange the proceeds of the sale of the business. Create a plan outlining your financial goals and be aware of any tax consequences associated with asset appreciation. Talk to different professionals to determine how you want to invest and focus on long-term benefits, such as getting out of debt and saving for retirement.
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