What to Think About Before Selling Your Business
Here's what should be on your mind long before your business goes up for sale.
As unthinkable as it may seem today, you will eventually sell your business.
The reasons to sell a business are different for each owner:
Perhaps you are tired of working and want to retire (chances are you’ve earned it)
A child or a relative wants to take over the business
You are facing a health challenge and need to focus your energies on getting better
There’s another business opportunity tempting your attention
Or, ripe market conditions mean you’ll likely get top dollar for your company.
Whatever your motivation may be, it’s better to plan your exit now so you can prepare for the process, involve key people and get the buyer deal you deserve.
Here are three things you should be thinking about before you make a move to sell your business:
1. When will you sell? Understand it’s a process and not a deadline
Decide on a timeline to sell the business.
Rather than set a deadline, pick a two-year window of time to get the transaction completed. There are plenty of moving parts to tend to during that period: grooming the business for a buyer, hiring a broker, shopping for buyers, negotiations, a period for buyer due diligence, closing the deal, and some time for management transition.
Your selling timeline must mesh with the rest of your plans – be it retirement, health needs or succession planning. Be sure to consult with a financial advisor when contemplating a timeline.
2. How involved do you want to be after the sale?
Most buyers will insist on a period of management transition. That means the buyer wants to keep you and perhaps your management team around to make sure the business continues to run smoothly after the change in ownership.
Attaching that condition reassures the buyer your business is as sound as you promised, and it gives them a period of time to learn how you run things. The problem? You may not want to stick around. And some deals see the former owner glued to the company for 5 years after the sale.
Decide now how much time you are willing to offer to the buyer. It will become part of the negotiations and may affect the price.
3. How will you use the cash?
Money is never a problem until you have it! And the proceeds from the sale of your business will likely represent the largest financial transaction of your life.
Begin to talk with financial advisors now – such as a wealth management expert, your accountant and your lawyer. These experts will help you design a strategy to minimize taxes and make the most of your incoming cash. They’ll work with you to figure out how you can use the money to do the things you want to do.
Selling your business is a big deal. There are big steps to take and big decisions to make. So talk to people whose opinions you value – including other entrepreneurs who have been through an ownership transition.