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Did you know that 27% of Americans said they invested in the stock market to build their personal wealth in 2022? This is the most popular wealth-building move of the year, but it isn’t the only one.
Since more people than ever are starting their own businesses, more business sales are also occurring. If you want to build wealth by selling your business, you need to know where to start.
Keep reading to learn how to sell a business.
Time the Sale
There are business owners that consider selling their business when it is no longer profitable, but this can make it harder to find buyers. You can time the sale of your business by attracting buyers with these attributes:
- Increasing profits
- A strong customer base
- Consistent income figures
- A large contract that spans multiple years
Prepare for your sale as early as possible, or wait until these attributes become true for your company. It’s best to start planning a business sale a year or two ahead of time.
During your preparation, you can improve your business structure, financial records, and customer base to make the business more profitable. Improvements ease the buyer into ownership and keep the business running smoothly.
Value Your Business
One of the most important steps for how to sell a business is getting a business valuation. When determining the worth of your business, you don’t want to price it too high or too low.
A business appraiser can help you get a valuation. They will draw up a detailed explanation of what they believe the business is worth.
Documents like this from expert sources suggest credibility when it comes to the asking price. It can also serve as a gauge to help you determine a listing price.
Use a Broker
Selling a company is a difficult task if you don’t know the process. That’s why many owners choose to use a broker to help with the sale.
Selling the business yourself can save you money because you won’t have to pay a broker’s commission. Selling on your own might be the best option when you are selling to a trusted employee or family member.
In other circumstances, a broker can help with the sale by trying to get you the best price. They’ll do their best to increase the asking price because it means a higher commission for them.
Hiring a broker also gives owners time to keep the business up and running. If you choose to go this route, discuss advertising options and overall expectations with the broker beforehand.
Hire a Lawyer
There are hidden pitfalls to any type of business sale so it’s helpful to receive valuable legal advice before committing to a transaction.
There are a number of tasks that a business lawyer can handle to ensure you are getting favorable terms from a business sale. For one, an attorney can stay in contact with the buyer to submit important documents.
Lawyers are trained in the art of negotiation. Every sales agreement starts with a negotiation. With these skills and their ability to facilitate the transaction, you don’t have to worry about lengthy delays.
Prepare Documents
There are a lot of documents and contracts that will be important to the sale. A business lawyer is able to handle reviewing, drafting, and modifying contracts on your behalf.
In addition to contracts, you’ll need to gather your financial statements and tax returns from at least three to four years back. If you are selling equipment with the business, develop a list of these items as well.
Make sure you include relevant paperwork, such as your lease. Make copies of every document so that you can distribute information to potential buyers. Create a summary of your business describing how its conducted.
Show your business off in a presentable way. Prior to the sale, fix or replace any parts of the business or equipment that are run down or broken.
Find a Buyer
Businesses for sale don’t always go fast. A sale can take anywhere from six months to two years to complete.
Take on different advertising methods to attract more potential buyers. Try to find more than one prospect in case the initial deal falls through. Once you have options, keep the process moving with these steps:
- Stay in touch with all possible buyers
- Find out which buyers pre-qualify for financing
- Work with your lawyer to reach a financial agreement with the buyer
- Provide some wiggle room in pricing for negotiations, but stand firm on a reasonable price
- Put all agreements into writing
Potential buyers should sign confidentiality or non-disclosure agreements so that your information is protected. The buyer might also request that you sign a non-compete agreement stating you won’t start a new, competing business.
A lawyer can draw up these contracts for you. They can also handle documents you’ll likely encounter once the sale is finalized, such as the bill of sale and the security agreement.
Handle the Profits
Preparing for retirement is a common reason that people sell their businesses, but it isn’t the only one. Take some time after the sale to map out your financial goals before spending the profits you made.
It’s important to learn about tax concerns and any other consequences of sudden wealth, which your lawyer should be able to cover thoroughly for you.
If necessary, you can speak with a financial expert if you want to invest the money to reap long-term benefits.
How to Sell a Business: Explained
Learning how to sell a business requires understanding the various steps you need to take. To ensure you are getting the best deal for your business, hire experts that can walk you through the process.
Working with brokers and lawyers are key factors for a successful business transaction. Brokers can help you find buyers and lawyers can handle negotiations, contracts, and other necessary documents.
Selling a business is a long process, so get started right away! Contact us to get the legal help your business needs.
