Planning on selling your company in the near future? Many people dream of starting their own company, but if you’re one of the few who has turned their dream into reality, you know that it didn’t happen overnight. Making your business a success involved plenty of research, preparation, and hard work. However, of those considering moving on few realize that selling requires almost the same amount of effort and planning.
Entrepreneurs intent on selling often want to move as quickly as possible. They may dread the emotional letdown and want to make a clean break. Or perhaps they may be eager to move on to their next venture. Either way, the more preparation time you put in, the easier and more successful the process will be. Just as home sellers get a better price when they address maintenance issues before listing, pre-planning will smooth the way for selling your company painlessly and profitably.
Where to start? You want to take a two-pronged approach. First, determine what’s yours to make sure that you’re protected. Second, look at the business as if you’re a potential buyer. To clarify, check to ensure that everything is in order and is as appealing as possible.
Recommended steps to selling your company
Stay Tuned In to the Business
Once you’ve made the decision to sell your business, there’s a natural tendency to mentally check out. You need to guard against this. Specifically, continue to focus on the steps to get the selling process started while looking to your next venture. The success of your sale relies on the company operating at the top of its game. If you’re distracted or have a loss of interest, the sale may not go as smoothly as it could. Put as much effort into the company’s success as you plan to let go, as you did when you started.
Clean up Your Books – and Everything Else
You may have all the numbers and figures in your head, but that’s no help to a potential buyer. They want – and need — to see the pertinent records. This means going over the books to make sure that everything is as solid as you say it is. They also want to make sure no legal issues are lurking, or other surprise entanglements. This is the time to get caught up on your accounts and update all your other financials. Consider getting all equipment maintained and organizing your inventory. Finally, gather all pertinent paperwork into a clean package that you can present with pride. Doing so will paint a clear picture of your company as a good investment.
Before Selling Your Company, Ensure that Trademarks and Copyrights are in Place
You’ve built a brand, but have you secured it? If you haven’t secured a copyright, patent or trademark, your most valuable asset may end up in someone else’s hands. If you’ve been gliding along without the help of an attorney, this may be the time to hire one – even as you’re about to walk away.
Establish Your Exit Strategy
Do you intend to just walk away once all the paperwork is signed? Or do you want to continue to play a role in the business you created? There’s no right or wrong answer, but you need to figure it out before you start the sales process. This way you can present your plan as part of the package. Nothing will kill a deal faster than springing a surprise on a buyer whose plans don’t mesh with yours.
Along the same lines, you need to consider what your post-ownership plan consists of.
If you’ve already lined up a new gig that provides financial stability then you’re all set. But if not, your deal may need to include details of deferred payments or stock options. Consider if consulting fees, or other paid position for a period of time would be necessary after the sale. You also need to consider your tax liability from any gains you realize from the sale. If your company qualifies as a qualified small business, you may be able to defer the federal tax on your capital gains.
Take A Good Look from the Buyer’s Perspective When Selling Your Company
Once you’ve taken all of the steps to prepare for a sale and protect yourself, take a final hard look at what you’re putting on the market. Just as you’d walk through your house and give it a once-over before you have an open house, you need to scrutinize the way the company’s assets look from a potential buyer’s perspective to see if there’s anything else you could have done to optimize or reveal its appeal.
In addition to each of these steps you can pursue on your own, it is worth considering bringing in an expert to help you with valuation and the sales process. Not only will they guide you through what can be a challenging process, but they will also ensure that you haven’t overlooked any important legal requirements.
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