There are plenty of reasons why a person would want to sell a business. First, he has been working for a very long time and has reached an age where he wants to move on to other things or retire. Second, the business no longer interests him, and he wishes to focus his attention on a different industry. Finally, he requires financial resources, and selling his business is the perfect way to get them.
Whatever the reason might be, the most important thing to consider is getting the best value for your enterprise. Whether you are selling your firm to another individual or a giant, multi-national corporation, you have put in the work to develop it, maintain it, and make it grow. As a result, the last thing you want is to get less than what you deserve.
To prevent this from happening, there are a few key aspects you should consider. Among other things, they include understanding your brand value, getting your finances in order, and making sure all legalities are properly handled.
Understanding Your Brand Value
Companies like Nike, Apple, Chanel, and Microsoft are well-known throughout the world. They have both experience and expertise, and you will be hard-pressed to find anyone who doesn’t know at least two of them.
Your business is probably nowhere near as big or as famous. Still, that doesn’t mean the value of your brand is not important. If you are in the retail industry, you could be the owner of a small grocery shop, a hair salon, a clothing store, or a private cosmetics label. Whatever the case may be, there are two steps you could take to understand its brand value.
First, you can look into the number of clients you have and how this has changed over time. Second, you can explore sales figures both from first-time and repeat customers. This will help you determine whether your brand is stale or has been gaining recognition.
Getting Your Finances in Order
For potential buyers, there is nothing more important than financial information. As a rule of thumb, they will look at your company’s data over three to five years. This includes cash flow statements, income statements, balance sheets, and statements of shareholders’ equity if you have any.
In most cases, there are two ways to do this. On the one hand, you could prepare the statements yourself or have somebody else within your organization do it. On the other, you could hire an external certified public accountant. Even though this will cost you a bit of money, the documents themselves will be of greater value to your buyers as they are more reliable.
Another aspect you should consider is presentation. Some investors like looking at very specific data such as outstanding debt or operating revenue, while others prefer taking a more general outlook on total revenue and growth in profitability. They might also ask for graphs, charts, and other types of visuals to simplify things.
Making Sure All Legalities are Taken Care Of
When selling a business, there are many legal aspects to consider. First and foremost is the type of business entity your enterprise falls under. If you are the founder of the organization and started the company by yourself, it is a sole proprietorship. Otherwise, it could be a general or limited partnership or a corporation.
Of course, you already know this. Yet, now is the perfect time to refresh your memory and go back to when you first began. Along with a basic income tax, as a sole proprietor, you are liable for self-employment taxes, estimated taxes, federal unemployment taxes, and social security and medicare taxes. If you are part of a partnership or corporation, the circumstances are similar but not entirely the same.
One way to make the selling of your business a complete failure is by not doing your due diligence on tax-related legalities. But aside from that, remember also to take a look at any permits, vendor contracts, leases, or licensing agreements that your enterprise might have. The last thing you want is not being able to complete a profitable win-win deal because of negligence and a lack of attention to legal details.
Selling a business is a process that requires patience, diligence, and hard work. It entails understanding your brand value, getting your finances in order before presenting them to prospective buyers, and making sure all legal matters have been properly taken care of.
If you think there are too many things to do, you are right. Yet, it is your business. It is the result of your labor and the labor of those you trusted to help the organization move forward. As such, only you can decide whether it’s worth your effort and your time.