Once you have decided you want to sell your business, you have many more decisions to make. No matter the reason you’re selling your business, the sale takes preparation and patience. Any insight into the sale of a business can be valuable, so continue reading for must-know tips for selling your business.
Tie Up Loose Ends
If there is anything out of place or unfinished, you need to have them completed and fixed to protect the value of your business. You want your business to be in tip-top shape when you’re prepping to sell. It is ideal to start this process a year before you plan to sell the company, so you have enough time to be thorough. A few ways to make sure your business is ready are:
- Have an experienced accountant audit all your financial statements.
- Review your important employment contracts and make sure they are open to staying after the sale.
- Hire a lawyer that specializes in intellectual property to look over all your business contracts.
- Make sure your business is set up to where you will pay minimum taxes on the sale.
Know About Valuation
You do not need to know all the ins and outs of business valuation, but it is important to understand the basics. The main factors that determine the value of a business are cash flow and EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization. If your business has high revenue but limited cash flow, your business is less valuable. Many buyers will consider other factors such as efficiency, your process, and management. To get an accurate valuation for your business, you should hire a business appraiser.
Separate Your Personal Expenses From the Business
If any of your personal finances are tied to your business, you need to separate them. It’s common to intertwine the two as a business owner but they can cause issues when potential buyers look at the business’s finances. If you’re not sure how to go about separating your finances, contact a financial advisor that specializes in business owners.
Hire A Business Broker
An experienced business broker will be able to properly list your business and increase your chances of finding a great buyer. Their networks can help you find buyers that never would have been able to find your business without the help of a business broker. The broker can also provide important insight on how to best market your business.
Consider Gifting Part of Your Business Away
One thing people who are selling their business do not take into consideration usually is the tax implications from the sale of the business. For some, most of their net worth is in the business. A big tax bill could derail their financial goals they may have in the future. Before a business owner signs on the dotted line, they should consider being charitable to avoid a large tax bill and most importantly give to an organization(s) they are passionate about. An experienced financial advisor and accountant in this area of gifting should be involved to strategize the best way to do this. Every situation is different.
Have A Plan for After You Sell
If you have put blood, sweat, and tears into your business, without any plans for after the sale, you could end up being bored or unmotivated. Whether you are retiring, going to spend time with your family, travel, or start a new business, having plans and goals is important. Be sure to still give yourself time to relax and reset before starting on a new venture.
If you need assistance setting up a plan for selling your business, contact us at Plan A Wealth Management. We will be able to advise you and provide valuable knowledge throughout the selling process. Give us a call to get started.