Guide To Preparing A Business For Sale


There a number of steps those are to be followed to successfully complete the sale of your business. It all starts with getting your business evaluated, and then you have to market your business in order to attract the potential buyers, and then there is choosing advisors who can advise you relevantly on how to find purchasers for your business. The advisors and you should be ready and demonstrate some negotiating skills in order to finalize the deal on selling your business. In this article, we shall explain the steps you need to follow in order to complete the sale of your business. It shall explain the factors that you might want to consider when you weigh up offers to sell your business. Price is important in business, that?s true, but there are lots of other factors. It is very important to take into consideration the tax implications that will govern such business deals. This article also covers how to close a sale agreement with your buyer and the background checks of the business that they shall conduct to ensure that the information provided by you regarding your business is true and correct and there are no misleading factors.

Preparing for the sale of your business

You need to prepare for several stages when selling your business. Following are the steps that you might have to consider:

1) Valuing your business

2) Increase the value of your business before you try to make a sale out of it

3) Taking tax advice from an attorney because the tax issues might create hindrances in your sale when you try to make a sale of your business at a later stage.

4) To look out for potential buyers and identify which one should you consider amongst them.

5) Marketing your business so as to raise its value in the market and make people aware that a business is available for a sale to be made to bid by the interested purchasers.

6) Meeting the potential buyers, looking at what they can offer for your business, identify how are they going to take your business further and what do they have in store for the development of your business in the future. You need to have a look at their bids and what do they need to offer to your business. Perhaps a look at their plan of action for future of your business is good. Then you need to negotiate on their bids and seek out for the best price for your business that the market of potential buyers has to offer you.

7) One you finalize on the potential buyer and shortlist him for buying, there are a lot of legal hassles that you might get into. You need to make yourself free from all the legal issues with an advice from a lawyer who might guide you to sign a series of contracts, No Objection Certificates and Power of Attorneys and the you are finally able to hand over your business to that buyer for the price that was mutually agreed before by you and the other party.

8) Then you need to finalize the deal one last time by signing a sale agreement which is between you and the buyer. Once you are done with all the transfer of ownership papers, you are free from the ownership and legal obligations of the business. This process is called the Change of Ownership of the business.

Maximizing the value of your business

It is much needed and worth it to spend time in getting your business into shape and spending time on it just before you are ready to sell it. This will increase the market value of your business and you shall be able to gain a much higher value. Of course, every gain in business comes with a small amount of investment that is to be made. It is even worth it to invest a certain amount that is inconsiderate to you owing to the size and value of your business that you are planning to achieve. The cost involved in raising the market value of your business is nothing compared to the amount of money that you shall get after you sell it. Or rather, we should say the increase in the amount of money. Raising the value of your business includes cutting down on costs, reducing the debts that you owe someone by paying the individual or the institution with the required amount of money. A business in debt will attract lesser number of potential buyers. Also, you might have to give away financial information of the business regarding the inflow, outflow and usage of funds.

There are several methods by which you can determine the value of your business. Perhaps seeking a help from an accountant, a corporate consultant or a solicitor might be of great help. They shall provide you with realistic valuation as per the market situation and might advise you to wait till the market conditions improve. Keep you information papers ready to smooth things out and quicken the process of selling.

Choosing and negotiating with a buyer

Once you are ready to sell your business, you let out an advertisement in the newspaper or the electronics media like the web and mouth to mouth publicity also helps a lot. You are then quoted different prices from different buyers interested in purchasing your business. You have to understand all the bids and consider their terms and conditions once you set foot and get ready to sell off your business to a potential buyer. You have to understand all the offers and the hidden clich?s that go along with the offer.

Consultation from the lawyer is of great use here. Once you are in a position to make out and all the offers are explained to you thoroughly by the lawyer you can narrow down and go ahead with the shortlisting of buyers who are interested in buying your business at a quoted price. Then you might consider negotiating with the potential buyers in case you think the buyer has a promise to keep and shall do justice to your business in the future. You and your advisor are required to have a discussion in detail with the other party about your business and the offer provided to you. You can allow the advisor to lead the discussions and provide you advice on each and every step when it comes to an offer change for buying your business at a somewhat negotiable price.

It is necessary that you develop a relationship based on trust with the potential buyer of your business. This is true when you have already chosen your potential buyer. You need to only discuss terms with only this candidate without seeking for other candidates to bid for somewhat more price. And offer you with more benefits of possible compared to the current buyer. Do not try to negotiate in better terms once you have reached this stage. It is very important to understand the offer that is made to you. This will make you understand if you are liable to anything once you accept the offer.

Create a written agreement

Once you accept the final offer from the buyer and decide that you want to sell the business to him, you will be presented with an agreement which will contain certain terms and conditions. You then need to read it and understand it and then agree to the Heads of Terms. It is also known as the ?letter of intent?. This is the document that is legally binding and also sometimes known as the ?letter of intent? It highlights the key points pertaining to the deal. For e.g. the agreement of buying, the structure of the payment, they party that is supposed to bear the certain costs when there is a change introduced to the business, the lists of the assets that the company need to own and what was owned by the business before, the list of the contracts those define the terms and the conditions, and to some extent, the roles and responsibility of the employees.

The agreement behaves as a written record. The written record in which highlights the key features of the agreement that is made between both the parties. This particular document is used to then brief on the terms and conditions to the advisors and the lawyers and perhaps even the accountants. There may be an exclusivity period during which you are not allowed to not to negotiate with anyone else for the sale of your business.

The due diligence

The due diligence mostly covers the following aspects of business:

1) How the business has been in the past and forecasted growth towards its future
2) Accounts section
3) Valuation of assets related to business
4) Legal issues
5) Legal action against business in the past against the business
6) Customers of the business
7) Intellectual Property Rights

Thus, in the above article, we have explored the various factors you have to consider before you make a sale of your business and how to go about selling a business. From our discussion above, we conclude that the sale of the business is a critical decision for the owner of the business and should be a wise one.

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Disclaimer: The suggestions in the article(wherever applicable) are for informational purposes only. They are not intended as medical or any other type of advice