Entrepreneurs can make serious money if they decide to sell a business, no doubt. But a great deal of work goes into the transaction itself. Finding just the right buyer is not the only arduous task. And the higher the price tag, the more complex the transaction can become.
Selling a small business for the maximum value to the right purchasers on the right terms can be a tremendous challenge, even for experienced business owners. Buying and selling an existing company is a complex process, but one that should be demystified. At its most basic level, the process is straightforward, just like the purchase of a single item. The small-business owner sells their own business to a potential buyer for an agreed-upon price and mutually acceptable terms. Yet, as always, the devil is in the details, in this case how the deal is structured.
Using a business lawyer facilitates the selling process by eliminating the day-to-day interactions related to selling your business, and the best ones will craft a unique strategy to get all the things correctly done, and facilitating to sell a business.
As a preliminary matter, it´s necessary to determine the value of the business. This helps establish a range of reasonable prices for the company. Next, the seller reaches out to potential purchasers. They prepare an offering memorandum or informal document that paints a basic picture of the business and what’s included in the sale.
Once a serious candidate emerges, that interested party conducts due diligence to make sure what’s promised in the offering documents matches the company’s reality. If that investigation checks out to the buyer’s satisfaction, the parties negotiate the key terms, including but not limited to the price. Finally, after you reach a purchase agreement, you execute all the necessary legalities. This means you prepare the contracts, then review and sign them.
Obviously, this process can be far more complicated, as is often the case with publicly traded companies. For most small to mid-sized companies, though, this is generally how things unfold.
It’s important for the entrepreneur to align himself with the right seller’s agent or representative for support and guidance before taking the first steps, especially if he had never sold a business before. Ideally, this is a person with proven expertise and familiarity with the current state of the company’s industry. A seller’s agent acts in the company’s best interests in finding the right buyer. They can assist with advice and representation throughout the process.
A good agent will also help secure other valuable team members. These may include an experienced business-valuation expert and a specialist attorney or CPA who can help advise the business owner on the tax implications of his sale. Even if he´s selling a small business, it can be a major undertaking.
To sell a business requires a formal assessment of exactly how much a company is worth. Qualified prospective buyers will want reassurance that the company is worth the asking price.
A proper valuation of the business and its assets protects both seller and purchaser, so getting this right is in businessman’s best interests. Ideally, he’ll want a range of potential values tied to specific market or sale factors. Cash flow, intellectual property, financial statements, customer base and management team can all play into the transaction. If conditions change or negotiations develop in new directions, he’ll have a better idea of how those developments should affect the sale price.
By demonstrating the true value of the company in a relatively transparent way, also have a better chance of maximizing the final sales price for the company and thus getting the best possible result.
Not every pending sale will close, and not every negotiation will end successfully in an agreement to buy. That’s just one reason why it’s crucial to establish a duty of confidentiality between the company and prospective purchasers. Seller’s agents help in this area, but at some point, the businessman will probably also want to get a strong Non-Disclosure Agreement, or NDA, signed by the prospective buyers. It’s important not to skimp on this point. Retain the services of an experienced business attorney to draft a firm NDA that will protect the company’s interests while avoiding onerous terms that might scare off a qualified buyer.
To sell a business is a significant undertaking, one of the most important business decision an owner will ever make. Education on the available options and giving strong thought to the pros and cons of each. If don’t know exactly what the ideal outcome looks like, maintain flexibility in the thinking and empower the advisors to create options.