Business sale and purchase transactions are incredibly complex. People who acquire or start a business may eventually want to sell the company as they prepare to retire or move on to a different opportunity. Selling a business to a competitor or an outside investor can be an excellent way of financing retirement dreams or an entrepreneur’s next big project.
Unfortunately, there is plenty that can go wrong during a business sale transaction. For example, owners might accept less than the company is worth or end up in limbo for months while waiting for the right buyer. Those hoping to sell a business may benefit from performing the three steps below during their sales process.
1. Identify and address company liabilities
Are there minor outstanding debts that the business can resolve in the next six months? Is there a problem employee who doesn’t pull their weight at the organization?
Issues ranging from facility maintenance to expiring contracts with vendors can diminish the value of a business for sale and can complicate the due diligence process of a prospective buyer. Business owners who identify and address company liabilities may have an easier time than others securing an optimal price for the organization.
2. Set an appropriate company valuation
Allowing buyers to make offers can sometimes lead to lucrative terms, but most would-be business owners aspire to keep their costs as low as possible. Small business owners can weed out time wasters and those unable to afford a successful organization by performing a business valuation or having a professional perform one.
Establishing a reasonable and fact-based value for the company can lead to better offers and easier negotiations. Buyers who decide to make an offer know what the current owner expects, which can lead to appropriate offers.
3. Approach prospective buyers
Maybe there is a competitor who has previously made an offer to buy the company. Perhaps a regional business has started expanding into the local market but has yet to establish a toehold. Business owners can often identify parties who may have an interest in acquiring their company.
Instead of simply listing the company and waiting for offers, it can be faster and potentially better for the company’s branding to directly approach prospective buyers. Clients, employees and suppliers may view the listing of the business as a sign that the company is in distress. Keeping the proposed listing quiet initially by reaching out to potentially interested buyers one-on-one can be a viable strategy.
Seeking proper legal guidance throughout the business listing and sale process is important. Getting support while preparing for a transaction, negotiating terms and finalizing the sale can help small business owners looking to sell their business.