Business owners make the choice to shut down their businesses or transfer ownership when retiring. A business sale helps the companies generate more profits and acquire more money for the owner’s retirement. A broker can help the business owner with a more comprehensive plan for selling the business and maximizing the profits.
A broker provides advice about the sale and what the business needs to do in preparation. They present a checklist of tasks to do when preparing for the sale, and the brokers may advise the business owner to start as early as one year before they place the business on the market.
How Much Is Your Company Really Worth?
When evaluating a business, the appraiser assesses the current net worth of the business and its brand. Name recognition and brand awareness could be factors they consider when appraising it. A business is not just its assets but also the profits it will generate through its existing product line and services.
The appraisal defines how much the business as a whole is worth, and how much a buyer would expect to pay for it based on these attributes. Business owners can learn more from CGK Business Sales about selling their business now.
Why Are You Selling Your Business?
The reason behind the sale determines what could happen with the business. For example, if the business owner wants to retire, they have the option to shut down their company and sell it as a whole or through individual assets. They could set up the same to give themselves lifetime royalties or residuals for specific products. The terms of the sale outline whether the business owner retains any rights to products or specific services.
For example, if the business owner intends to transfer ownership for certain products to a new venture, these products would not go with the company. However, if the product is the sole source of profits, the buyer will want to acquire the product, production details, and all rights to the product.
How Will You Promote the Sale?
Brokers can promote a business sale and place the information in front of buyers. It is through the proper promotion of the sale that the business owner can attract more buyers to their business. How attractive the deal is to buyers defines how much the business owner could generate from the sale.
What Assets Are Staying with the Company?
Some business owners may choose to sell assets before the business sale begins. It is best to discuss these options with their broker and determine what assets should stay with the company and how the business could profit from each option.
If the business is more profitable as a whole, the business owner may want to sell these assets with their business. If the assets are not useful for a buyer, the owner may want to sell them and cut their losses. Buyers want equipment and assets that help them generate profits and won’t present them with greater upfront costs when reopening the business on their own.
Are You Closing the Business?
Whether the business will continue operating is a vital detail business owner must know. When attracting buyers to the business sale, it is important to know if the buyer will continue to operate the business or they are just purchasing the assets and business for a separate venture.
When selling the business, the business owner is selling it under its current name, and once the sale is completed, the seller cannot operate another business with the same name. They must decide if they are selling the business with the name or if they are shutting it down completely.
Gather Financial Records for the Business
The business owner must evaluate all their financial statements and records for their business and ensure that all records are in order. The financial records must be accurate and realistic. There shouldn’t be any inflated amounts to make the company look more profitable than it is. By hiring an accountant to evaluate the records, the business owner gets a more realistic look at their finances and sees where they should make changes to make the business more profitable.
Do You Have Overdue Tax Payments or Liens?
All overdue tax payments or liens must be managed by the business owner. While some buyers will pay off some of the company’s debt when buying the business, it is less likely that they will manage tax implications or liens. The business owner must make a plan to settle these debts and ensure that the IRS doesn’t have any existing liens against the company or its assets. The tax liens could present difficulties when trying to sell the business.
Are There Existing Contracts with Partners?
If the business owner has contractual obligations to a partner or another business, they must evaluate the terms of the contracts and settle them before the sale. If the contracts are based on specific products, the business owner will need to add clauses to the sales contract to ensure these obligations are fulfilled.
Partnerships must be dissolved before the business sells. The business owner could transfer the contracts to the buyer if their partners agree to the new terms of the contract. However, they may have to start a new contract with the partners or business. The buyer and seller would have to come to an agreement about the existing contracts.
Business owners sell their companies for different reasons. They will evaluate their debts, profits, and contracts before starting the sale. It is recommended that the business owner meets with a broker to evaluate their business and its current value.
A broker can present them with advice about selling the business and help the owner avoid major complications that could delay the sale or decrease the selling price. Brokers will provide the business owner with a checklist of tasks to complete at least one year before the sale. Business owners must create a plan for the sale of their business and find better ways to generate more profits.