Selling a Business – Houston Law Firm
Selling a business is a venture that involves some considerations. Given that the process can be a bit complex, it is important to be aware of the stages involved and the knowledge of what is involved in the process. This article by RunRex highlights the important stages in the process of selling a business.
- Reason for sale
The first question that any interested buyer would want to ask is why you want to sell your business. Some of the common reasons sellers give include retirement, partnership disputes, overworking, illness and boredom. It is important to have a legitimate reason for selling your business. For instance, if your reason for selling the business is because the business is not profitable, getting a potential buyer for the business can be a bit hard as that points to it being a high-risk venture.
- Proper timing of the sale
If you intend to sell your business, it is important that you consider the timing. Prepare the sale as early as possible. In order for you to boost your chances of getting a potential buyer, ensure that the business has consistent or increasing profits, consistent income, a strong customer base and major contracts that last for some years.
- Valuation of your business
Business valuation is the process of determining the value of your business. Business valuation will ensure that you determine just the right price for your business and not to price it too high or too low. It is always advisable to have a banker or a financial consultant conduct the business valuation for a correct estimate of the worth of your business. This will help when negotiating a deal with the potential buyer.
- Pre-Marketing value enhancement
You can employ the services of an advisor to help review the company’s current position and have suggestions on changes and strategies that can be employed over the next 6 to 12 months to make the company more desirable to the eyes of potential buyers. These changes should not be massive such that they completely alter the operations of the company. Instead, they should focus on improving the current operations to improve the performance.
- Preparing company documents
Gather all the financial statements and the business’s tax returns from as far back as 4 or five years. Get an accountant to review them to ensure that they are in order. Develop a list of what it is included in the sale and what is not included. Have copies of all the active contracts and tasks that the business is handling presently. This information, together with a detailed review of how the business is conducted, will help give a potential buyer an understanding of the current state of the business.
- Find a potential buyer
Finding a buyer for your business can be a challenging task. It becomes even harder to get a buyer if your business is a multi-billion dollar company. There are a number of approaches on can adopt to get a potential buyer but there is none that comes with a guarantee of immediate success. It is important to employ an effective marketing strategy, in addition to making your business look appealing, if you want to get a potential buyer fast.
Always get at least two or three potential buyers just in case the initial deal does not go through as expected. Stay in constant contact with them and do a thorough background check on each one of them to ensure that they can meet their obligations in the transaction. Also, be a little flexible and allow room for negotiations while taking care not to go far from your company’s valuation. Also, it is important that you put every agreement you make with your potential buyers in writing and involve an attorney to protect you company information.
- Transaction structure
There are quite a number of professional and financial considerations that you ought to keep in mind. The other considerations that you have to look at other than the purchase price include earnout, stock vs. asset sale, assets retained by the seller, equity options packages and employee layoffs or preservation among others. You should specify the terms of the transactions, agree upon them with the potential buyer and ensure that the transfer of assets is done smoothly.
- Business transition
After the transfer of ownership is complete and all the paperwork is in order, it is important that you help the buyer in transitioning. This usually involves transferring customer relationships, explaining the market and management dynamics and sharing any other proprietary information that would facilitate the smooth operation of the business after the sale.
This entire process can take up to a year or even more. This can be quite exhausting and challenging. It is always advisable that in case you want to sell your business, acquire the services of a corporate attorney who is experienced in the field to help make the process smoother and more efficient.