There are a multitude of reasons that owners decide to sell their business. However, it’s not a simple process like buying or selling goods, and taking complexities in the law into account is key. Regardless of the reason, if you are thinking about selling your business, you should consult an experienced corporate attorney to help you prepare and maximize the valuation of your business. While each business and transaction is different, what follows is a brief synopsis of steps you should consider taking leading up to a sale.
Prepare for the Sale
First, you need to prepare for the sale. This means ensuring that your books are in order. In most cases, the buyer will want to see a minimum of three years of financial records to make sure they are making a legitimate and profitable decision. No one wants to assume control of a business that cannot prove it’s legitimate or not in the red. While an internal financial analysis and report can be adequate, an independent analysis of your financial statements is assumed to be more impartial and is almost always more impressive.
Get an accurate valuation
You should next get an accurate valuation of your business. Working alongside an experienced attorney can help you locate a trusted valuation professional who has experience in selling companies similar to yours. One major consideration regarding getting the highest possible valuation for your company is any intellectual property that you own or that can be obtained. It’s important to keep a careful log of all of the intellectual property that will be sold and include that in the price so you are not giving away valuable assets for free.
Make sure you’re doing it legally
Third, you need to consult with your lawyer regarding the type of transfer you would like to pursue. The two typical types of transfers are an asset sale and an ownership purchase. An asset sale allows a buyer to pick and choose the parts of the company he would like to purchase as only the assets are transferred. In a sense, you’re not selling your business just some parts of it that help it run. You still remain in control of the legal shell of the corporation, including it’s name and legal status as a corporation. An ownership purchase is a sale of the entire business where the buyer steps into the shoes of the seller. The seller no longer retains any control over part of the company after, and the entire business, intellectual property and all, is now owned by the buyer. An experienced lawyer will help you select which form of transfer is most appropriate for your sale.
Give yourself a break
Preparing to sell your business is a long and extremely detail oriented process. Don’t let it consume you or affect the business as you try to sell it, or the value may go down. Working alongside your attorney can take some of the responsibility off of you and ensure that you get the highest possible price. An experienced corporate attorney is essential in planning for small businesses and drafting and reviewing the documents that will execute the sale if you’re going to get the most out of your business and make money from the sale.
Photo Credit: Flickr/Michael Kappel