There comes a time for all business owners when they might want to sell their business to move on to bigger and better things or because they just aren't making enough money for it to be worth it anymore.
If this sounds like you, you may be asking yourself "How do I sell my business?" It's not a complicated process if you know what you're doing but it is easy to make mistakes with it if you don't. In this article, we're going to go over the process of selling a business while also going through a few mistakes that you might make during the process.
Usually, the purchase of a business is going to be in the form of one or two methods, asset purchase or stock purchase. We're going to briefly go over both of them.
An asset purchase is when the buyer either buys some of the seller's assets or all of them. The buyer gets the most out of this purchase because they will get all of your equipment and inventory without taking on any of the debts that you accumulated throughout the years of running your business.
A stock purchase when the buyer fully steps into your shoes and takes either some or all of your stock. This option benefits you the most because they will take on your debts where you left off. It gives you back your freedom and allows you to wash your hands clean in a sense.
Next, we will be giving you an idea about how the sell might go down so you can know what to expect.
2. Primary Negotiations
At this time, the buyer will take their time investigating you to decide if your assets are worth taking. You will meet and discuss this through this process. It may take a little longer if you are doing a stock because they need to know what they are getting themselves into in terms of your debt.
When you meet you should discuss this along with your need for a board of director's approval if you need any third-party documents, and if you need any third-party approval. Once you've come to an agreement it's time to sign the forms and get started with the pre-closing processes.
A final agreement is finally created. It contains every detail of the deal that was made, the price, when the business assets will be turned over to the new owner if these assets will be held by an escrow agent, and any other important factors.
Once pre-closing starts, the seller and the buyer will be responsible for gathering any documents that are needed to finalize the deal. These documents will vary depending on if it's an asset purchase or stock purchase.
Finally the moment of truth, it's the day of the closing. It's a lot of paperwork so to make things easier on yourself there are a few things that you'll need to do.
Make sure every document is both signed and notarized before the big day. The sales proceeds need to be handed out properly according to the terms in the agreement. Lastly, make sure you record an extra copy of all the important documents like the deed.
5. Common Mistakes Made
This is a basic rundown of what the process will look like. It seems pretty on paper but in practice, it isn't as straight forward. It is very possible and easy to make mistakes. We're going to go over a few of the common ones.
Not Preparing Enough
The most common and easiest mistake that you can make is failing to prepare enough for the process. Again, you want to make sure all of your documentation is together.
If you're considering selling your business, you need to start the process as soon as possible. It will take around two years to finish the process so you can see why you shouldn't put it off.
Being Too Confident
There is nothing wrong with being confident but where you fail is when you're too confident. When this happens, it could cause you to slack off in making the right preparations. This brings us back to the point above.
If you're confident that you will get top dollar for your business, you'll want to stash those dreams away. Granted, it is possible that you will get what you want for it but if you're stuck on that amount and refuse to budge, you may never sell your business.
Unwilling to Bring in Professionals
You know how to run your business, but think deep inside yourself and ask, "do you have what it takes to sell it?" The answer to this question is most likely no, or at least not as well as a professional could.
Yes, it does cost to hire a broker but chances are, they can sell your business at a price where you will hardly miss the amount of that cost.
Still Asking Yourself How do I Sell My Business?
Are you still asking yourself the question "how do I sell my business?" It's a long process but not a difficult one if you know what you're doing. There are many mistakes that you could make, but if you call an experienced broker they can walk you through the negotiations, the pre-closing, and closing process.
Need to get your business sold? Contact us today to talk to one of our experienced attorneys.