No other words have more meaning for business owners, yet many businesses fail to plan adequately for one of the most important phases of a business life cycle: The end.
We know business planning is a critical factor determining the financial health of any privately held business. Any business owner who fails to plan for the succession of ownership is acting irresponsibly.
Whether you transition the business to an heir or sell it to an outside buyer, you must prepare for at least one of six possible reasons for business succession:
- Desire to pull to capital
- Poor performance
- Required to relocate
- Better opportunity
- Poor health
The question is not whether you need to plan for transitioning your business; the question is how you do it.
Here are four helpful tips for selling your business:
Know Why You Want to Sell
The important thing is to know what is motivating you to pass on the reins of business ownership. If you still have the fire to run a business, but some parts of the business financial performance is lacking, you can sell the underperforming assets. You might find an investor to alleviate some of the financial burden, while allowing you to remain in complete control of the business.
Clean Up the Business
Before you show potential buyers and/or investors the physical business, you need to make the place look attractive for sale. Apply the same diligence for making your business look good as you would if you put your home on the market. Cleaning up also means ensuring financial records are all in order.
Tax and Estate Planning
The goal of any business sale or transition should be to minimize taxes. If you plan to sell your business to an outsider, you have to consider the tax applied to the profit made from the sale. Business owners who transition business operations to an heir must consider the estate tax implications of the move.
Work with Professionals
Selling a business is a daunting task for anyone who does not understand how to broker a deal. You should discuss your plans with a business broker or investment banker that has established several years of completing successful mergers and acquisitions. Most important, you need to seek the legal advice of an attorney who has the legal chops to make your business transition as smooth as possible.