Exiting a business, whether the sale is to a family member or to a third party, is a tough decision to make. Upon reaching the decision, exiting owners are often eager to complete the process as quickly as possible. In many cases, making the decision is just the beginning of the process. Consider the following to gauge your readiness to sell your business:
- Transaction Clarity. Aside from deciding to sell, unpack what that actually means. Are you selling just the business operation or is there also real estate involved? Are there affiliated businesses that cost-share?Many sellers embark on the objective of selling the ‘business’ without considering their strategy for all of their related assets. Real estate is a prime example. Some businesses can operate anywhere and can be the easier sale, but in such cases, the commercial building that the seller owns may be more difficult to dispose of, especially depending on location and the rent that the seller is proposing to charge to the business’s buyer. Sorting out any ancillary issues will smooth the sale of the business itself.
- Know Your Business. For a seller, a business transaction typically means getting as much money for as little risk as possible. For a buyer, a business transaction means understanding how the business makes money and what risks and liabilities are packaged with that money making opportunity. As a seller, do you know what contracts are out there and what your business’s liability is as far as price, quantity, and length of the contract? Can a contract be transferred without consent?Many sellers, particularly experienced ones who have ‘graduated’ from the trenches, don’t have a firm grasp on the contractual specifics that the business currently operates under – they just assume it’s taken care of. Not unlike a car purchase, a buyer of a business will want to look under the hood, check the mileage, and kick the tires. Sellers can be a step ahead if they have familiarized themselves with the condition of their business beyond what the bottom line will show.
- Patience Isn’t Just A Virtue. Business transaction documents can be complex creatures and conducting due diligence on a business takes time. Plan ahead to ensure you have left yourself ample time to exit the business on your desired timeline or a little earlier. A transaction will not be completed in a day.
- Educate Yourself. The transactional world, whether it be a business or real estate sale, can be a confusing one filled with technical jargon, shorthand, and uncommon concepts that don’t often arise in everyday situations. The phrase ‘fake it until you make it’ should not apply here. Before you put out the for-sale sign, do your research and meet with your professionals – accountants, attorneys, and advisors – to understand the moving concepts in transactions and how they interrelate. This prevents your business sale from becoming a crash course on transactional concepts.
Selling your business is a process as much as making the decision to sell is a state of mind. Putting in the time to be ready to sell will pay dividends, whether in dollars or stress levels. Keep Calm and Happy Selling!