Updated: February 13, 2023
Are you considering selling your business? Perhaps you’re looking to retire, move onto a new venture, or just want to cash in on a golden opportunity to maximize your return on investment. Whatever the case, the key to how to safely sell your business is no easy task and requires careful planning and preparation to ensure that you are able to reap the fruits of your labor and avoid any potential pitfalls along the way.
The team here at Monahan Law is here to help you in every way they can. For any questions you have for our Glendale business sale attorney, call Patrick Monahan today!
Call Monahan Law firm today at (623) 300-2727 and let us help you get started on your next business adventure!
What is a Sale of Business?
A sale of a business is the process by which an individual or organization sells all or part of its ownership in a business. This can include selling shares, assets, or the entire business. A sale of a business is different from a merger and acquisition in that the seller retains control of the business until it is sold and the prospective buyer takes on the new ownership stake.
When getting the maximum value from selling a business, it is important to create an effective transition plan that takes into account the customer base, business decisions, and the successful transition of ownership to ensure that your business adventure ends on a high note.
Reasons for Sale of Business
The reasons for the sale of a business can vary from individual to individual. For some it may be personal; while for others, it may be motivated by financial, economic or strategic considerations. Notwithstanding, common reasons for selling a business include:
- Retirement: Many business owners decide to sell when they are ready to retire or may need additional capital for retirement.
- Increase Profits or Reduce Costs: Business owners may wish to sell a business when the company has reached a point of maturity and is no longer growing. This can be used as an opportunity to increase profits or reduce costs and return a greater return on investment.
- Merger/Acquisition: Business owners may opt to sell in order to merge with or acquire another company, to gain access to new markets, technologies, or resources.
- Succession Planning: Business owners may wish to hand over their business to family members, partners, or employees.
- Change of Focus: Some business owners sell to pursue a new venture or focus on other investments.
- Capital Need: Selling a business can provide the necessary capital for business owners who need additional funds to start a new business or invest in other projects.
- Market Opportunity: Business owners may choose to sell when the market is favorable and they can receive a good return on investment.
- Tax Benefits: Selling a business can provide certain tax benefits, depending on the type of sale.
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Key Steps to a Successful Sale of Business
Selling your business is no small feat and requires careful consideration, preparation, and planning. You really don't want to watch your years of investment flushed down the drain as a result of a bad sale. A well-versed business sale lawyer is always great to hire to help you with your needs. To help ensure your success, here are the seven active steps to a successful business sale:
Understand Your Motivations for Selling
Before you even get started, it's important to understand why you want to sell your business. Are you looking for a bigger return on investment, a retirement fund, or simply just a change in direction? Whatever your motivations are, understanding why you want to sell your business can help inform the rest of the bidding process.
There are several common mistakes when selling a business. This may cost you dearly and leave you with regrets that could have been avoided. So, determine why you want to sell and make sure that your motivations are sound. You can achieve this by speaking to a financial advisor, lawyer, or accountant before you make your decision.
Find the Right Time for the Sale
As an aged-long rule of thumb, timing is everything. If you’re looking to maximize your return on investment or simply don’t want to miss out on a golden opportunity to move on to the next stage of your career, you’ll need to figure out when is the right time for you to sell your business.
The right time frame may be when the market is booming and multiple buyers are interested, or when you’ve achieved several key milestones in your business. By researching the market and understanding your business’s position in it, you can determine the ideal period of time to put your business up for sale.
Determine the Value of Your Business
Every business is unique and comes with its own set of assets, goodwill, reputation, and financials. It’s important to determine the true value of your business before you start shopping it around for potential buyers. This means researching the market, understanding the worth of your assets, and calculating the potential return on investment for a buyer.
This can be done through an independent valuation or by getting help from financial advisors, accountants, and other experts. You don't want to sell a business for peanuts after years and a huge financial investment or end up selling too high and missing out on a large return. The sale price must be predicated on the business valuation.
Gather Your Documents and Due Diligence Materials
When it comes to the sales process, having the right documents and due diligence materials is essential. You will need to provide potential buyers with financial statements, business liabilities, contracts, tax returns, financial records, key employees, business assets, and other important documents.
Depending on the business size, you may also need to provide additional materials such as intellectual property (IP), market research, customer lists, and more. Gather all of the necessary legal documents before you start shopping your business around.
Find the Right Buyer
Once you’ve determined the value of your business, gathered all the necessary documents and due diligence materials, and figured out the right time to sell, it’s time to find the right buyer. This can be done through online marketplaces, brokerages, or direct contact with interested buyers. It’s important to evaluate potential buyers carefully, looking at their financial situation, reputation, and any possible red flags that could impact the sale.
Find Out if You Need to Hire a Broker
In some cases, you may need to hire a broker or intermediary to help you find the right buyer for your business. Brokers are experts in the sale of businesses and can help you navigate the complicated process of selling a business. They can also handle the negotiations and paperwork on your behalf.
Negotiate and Finalize the Sale Terms
Once you’ve settled on a buyer, it’s time to negotiate and finalize the sale terms. This is arguably one of the most critical steps in selling your business as it determines how much you get for your business and the extent of your involvement in the future. Make sure that all of the terms are clearly laid out, including payment plans, deadlines, and any contingencies. Also, make sure that you fully understand the terms of the sale before you sign on the dotted line.
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Close the Deal
Once all of the paperwork is done and the sale terms are agreed on, it’s time to close the deal. This can be done by signing a sale agreement and transferring ownership of the business. It’s important to make sure that all parties are satisfied with the outcome of the sale and that all necessary paperwork has been filed with the relevant government agencies. Also, both parties should also sign a confidentiality agreement, non-compete agreement, and non-disclosure agreement to protect the interests of the business buyer and seller.
Manage Your Profit
Once the sale is complete, it’s important to manage your profits correctly. After all of your hard work and investment in the business, you want to make sure that your return on investment is maximized. Speak to your financial advisor or lawyer about the best ways to manage your profits and ensure that you get the most out of your sale.
Hire an Experienced Business Sale Attorney
Selling a business is a big decision with a lot of potential pitfalls, so it’s important to have an experienced business law attorney on your side. A good business sale lawyer can help you navigate the process and make sure that the sale is legally sound. They can also help you determine the best way to structure the sale, protect your interests, and get the most out of your business sale.
For Monahan Law Firm, we have decades of experience in helping our clients to successfully sell their businesses. We’ll work closely with you to understand your needs, assess the potential risks, and provide you with sound legal advice. Contact us today to discuss and ensure that your business sale is a successful one and that you can reap the rewards of years of hard work.