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Thinking about Selling Your Business? - Some Quick Tips

Written by: Jerre Blodgett

Article Overview: Follow these tips for a successful business sale or merger and you'll be rewarded with a higher business valuation, a better buyer, tax savings and a more successful deal outcome.

Thinking about Selling Your Business? - Some Quick Tips

In my years in business I have bought and sold many companies of my own. As a consultant, I have assisted in the purchase and sale of many companies. Here are a few things I've learned that will help you do better with your own sale transaction:

• Best time to sell. Sell at a time when your sales and profits are growing. It is extremely difficult to explain the reverse of this.
• Decide whether you would stay with the firm for a period after selling, under a form of management agreement. This would make the business more valuable.
• Will you accept an "earn out" contract which pays you part of the total consideration based upon the performance of the company over some period of time after the sale? This can also increase the value of the transaction.
• Get an appraisal of your company. This can be as basic as researching sales of similar businesses and coming up with an estimated market valuation. You must justify your price to your prospective buyers, so be ready to explain your position in logical terms. You may want to get a third-party appraisal by a reputable firm who knows your industry. If you don't know one, ask around and do some research on the internet. Interview several before selecting one.
• Determine a fair range of pricing that makes sense. Be realistic.
• You can usually get more for the business if you accept terms. There are an infinite number of possible scenarios on how you will structure the deal.
• Decide whether you will sell the business as a going business or break things down into an asset sale, which is usually based upon both assets and market valuation including goodwill.
• Perform Due-Diligence on the Buyer. This is incredibly important, especially if you are taking any part of the consideration as a short- or long-term payout. Many transactions have resulted in hardship, disappointment and lawsuits after time because the buyer failed in their promises to pay.
• Talk to your CPA about tax ramifications. Various parts of the total consideration have different tax handling. Mistakes here can cost you thousands.
• Get professional representation. Business sales/purchase transactions are complex. You need representation from an experienced consultant beginning at the time you start considering a sale or merger.

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Article Tags: assets, best time, due diligence, estimated market, goodwill, infinite number, internet interview, li li, management agreement, market valuation, party appraisal, period of time, profits, prospective buyers, reputable firm, scenarios, third party, ul



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