8 Important Business Sale Do’s and Don’ts
You've worked much of your life to build a successful business, so be sure to give it the care it deserves when it's time to sell it.
Over the years, I have seen many businesses sold. During those transactions, there have been some common mistakes made, as well as positive moves. Here are eight important business sale do's and don'ts.
Let's start with a couple of things to avoid.
1. Don't have unrealistic expectations of the company's value.
When a seller builds a business, he generally has invested over the years not only money but sweat equity. This personal connection can skew your perspective, leading you to overvalue the company and ask too high of a sale price. To prevent this, consider hiring an independent business evaluation expert.
2. Do not finance the sale.
Many sellers are asked to provide financing to the buyer with the business as collateral. However, if the new owner runs the business into the ground, you'll get no money and get back a broken business.
Now, here are six things to do that will make your sale smoother and more profitable.
3. Determine your financial goal.
Do you simply want to cash out at the highest possible price? Or do you want to pass along a business that will continue to thrive? Your answer is crucial for both establishing your ultimate asking/sale price as well as in your search for a buyer.
4. Seek multiple bids.
There are many methodologies to valuing a business. That means a range of offers are possible.
5. Maintain confidentiality.
Customers, vendors and employees can become worried about a sale's possible changes. It is often tempting to try to assuage these concerns, but wait. With so many possible routes in the sale or merger of a business, it is best to communicate the sale facts after agreements are in place.
6. Have a good attorney draw up the sales agreement.
This is not the time to cut corners with legal fees. You want to make sure all issues are considered and all liability is transferred to the new owner.
7. Have a good accountant review the sales agreement.
This also is not the time to cut corners with accounting fees. With our country's complicated tax code, an accountant's attention could save huge sums of money by making appropriate changes to the language in a business' sale.
8. Finally, plan for life after the sale.
On the financial side, you need an investment strategy for the assets, as well as one to replace the income you no longer will be receiving from the business. You also need a personal plan. You have dedicated years to your company. Now you must determine where you will spend your time and talents.
A good wealth management company can help guide you through all these business sale do's and don'ts.