How to Sell Your Business Quickly
A long-time client once told me that everything is for sale for the right price at any time. I believe this is a very true statement. At some point, everything we do ends and the same is true with a business venture. Perhaps you have run your business for many years and are ready to retire or you are only three years into your venture and an outrageous offer comes your way. Or, unfortunately, things have just not worked out the way you planned and selling is the only option on the table. Whatever the circumstances, it is important to take certain steps to get your business ready to sell in order to maximize your profit potential.
Get a Valuation
Have you ever tried to sell a car? How did you come up with an asking price? I bet you went to Kelly Blue Book and plugged in the required information which spit out a range of how much you could get for it. It is a similar* process for a business.
I added the asterisk because the process is much more complicated and subjective than valuing a car, but similar principles apply. Instead of using Kelly Blue Book, you will want to find (preferably) a CPA (i.e. certified public accountant) that also has the designations of ABV and CVA next to their name. ABV stands for “Accredited in Business Valuations” and CVA stands for “Certified Valuation Analyst”. This individual will request lots of financial information from you and will generate a report using a few different methods that shows you what your business is worth today.
This report will help you determine an asking price and evaluate offers that come your way. Basically, this allows you to establish a baseline of what you feel is a fair price to sell your business. Schaffer Law Firm works with Rodefer Moss & Co. PLLC for business valuations/
Get a Business Broker
Selling a business without a broker is liking selling your house “For Sale By Owner”. Sure you won’t have to pay the agent a fee, but will you really maximize the total amount you can sell for your business or weed out the serious buyers from the not so serious ones? That is where a business broker is vital. A business broker will help you list your business, find qualified potential buyers, and walk you through the close of the sale. They buy and sell businesses all day every day. They know when to make a deal and when to talk away. Schaffer Law Firm works with First Choice Business Brokers.
Close the Deal
You are probably surprised that only at this stage of the process am I talking about getting the lawyer involved! I certainly recommend you inform your attorney that you are in the process of selling your business, but honestly until you find a buyer there is not much for us to do! But once that buyer does come along, it’s time for your lawyer to go to work for you. Generally the process should look something like this:
- Attorney or broker drafts up a Letter of Intent (LOI) between you the buyer. This hashes out the major points of the deal. This document is NON-BINDING, but it gets the “meat” of the deal out of the way so as not to complicate the rest of the process.
- Due diligence. I recommend about 30 to 60 days for the buyer to conduct due diligence on the business. This is where they will want more information including financial and corporate records, major contracts with clients, employment agreements, etc. They will want to see and examine everything that makes your business run.
- Closing documents. This part can vary. If you are selling all the “stuff” of your business (i.e. the assets) and nothing more, then your attorney will draft an Asset Purchase Agreement for you. This document will say “Seller sells to buyer all assets of the business for $X”. If you are selling shares or equity in your business, or the buyer is taking over your corporate entity, you will need a Stock Purchase Agreement. You will also need other documents required by your type of corporate entity to ensure the sale is consummated properly. Finally, if the buyer is not paying a lump sum you will most likely need a promissory note for whatever balance they will owe you over time. I recommend this be guaranteed by a person, not a corporate entity, and if possible secured by some kind of collateral.
Once all the parties have reviewed and agreed upon the closing documents you would choose a date to sign, turn over the “keys” and get your check. Going through the process outlined above will ensure a speedy, efficient, and hopefully profitable sale of your business.
If you are looking to buy a business or sell your business, contact Schaffer Law Firm to walk you through the process.
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