If you’ve gone this far, then selling your business has aroused enough curiosity that you are taking the first step. The following are some of the most common topics and questions frequently brought up by sellers. If you have any questions that we have not covered, please don’t hesitate to contact us.
You don’t have to make a commitment at this point; you are just getting informed about what is necessary to successfully sell your business. This section should answer a lot of your questions and help you through the maze of the process itself.
Okay, let’s assume that you have decided to at least take the first few steps to actually selling your business.
Before you even think about placing your business for sale, there are some things you should do first.The first thing you have to do is to gather information about the business.
If you’re like many small business owners, you’ll have to search for some of these items. After you gather all of the above items, you should spend some time updating the information and filling in the blanks. You most likely have forgotten much of this information, so it’s a good idea to really take a hard look at all of this. Have all of the above put in a neat, orderly format as if you were going to present it to a prospective purchaser. Everything starts with this information.
The big question is not really how much your business will sell for, but how much of it can you keep? The Federal Tax Laws determine how much money you will actually be able to put in the bank. How your business is legally formed can be important in determining your tax status when selling your business. For example: Is your business a corporation, partnership or proprietorship? If you are incorporated, is the business a C corporation or a sub-chapter S corporation? There are also tax rules that impact certain businesses on seller financing. The point of all of this is that before you consider price or even selling your business, it is important that you discuss the tax implications of a sale of your business with a tax advisor. You don’t want to be in the middle of a transaction with a solid buyer and discover that the tax implications of the sale are going to net you much less than you had figured.
Vast majority of buyers want to buy cash flow
This may be a bit premature if you not have decided to sell but it may help in your decision-making process to understand not only who the buyer is, but also what he or she will want to know in order to buy your business.
Here are some questions that you might be asked – and, should be prepared to answer:
The first thing to keep in mind is that the vast majority of buyers want to buy cash flow. Sit down with your accountant or bookkeeper and begin to get your financial statements in order, with cash flow the order of business. Cash flow is not the same thing as profit. Most buyers look at the profit and loss statement or tax return, as well as owner or family compensation. They will consider any excess compensation to employees and family. Buyers will also look at large, one-time expenses such as a new computer system or remodelling. They will consider non-cash items like depreciation and amortisation. Interest expenses will be reviewed, as will owner prerequisites. These are items that a professional business broker considers when advising a selling client on a selling price.
You should create an operations manual
This may sound like something that should have been done when the business first started, so it may be “after-the-fact”. You should create an operations manual. You may already have one, or started one years ago, or simply, have thought of doing one. Now is the time! It may actually create added value to the business. Even if it doesn’t, it will impress buyers that you have your business “act” together and should help you sell more quickly and effectively. Preparing a manual on how to operate your business can also be helpful even if you don’t want to sell. It doesn’t have to be elaborate, just cover the basics. A collection of ads that you have placed in a catalog or sample of products, publications, or menus (if the business is food related) is also impressive. Include anything to do with the business that might be helpful for a new owner. However, don’t include anything that is proprietary, such as customer lists, suppliers or secret recipes, etc.
Usually are not realistic buyers for small businesses
It might also be helpful if you took a good look at your business from the perspective of a buyer. Try to put yourself in the place of a prospective purchaser of the business.
Below you will find a few friendly recommendations that will help in our marketing efforts when you decide you are ready to sell:
Obviously, the financial records of your business are critical to the sale of your business, but how it looks is also important. First impressions really count! If a potential buyer doesn’t like the appearance of your business, the rest of it may never get a chance. If you have any questions, please don’t hesitate to call us. We look forward to hearing from you!