Determining whether to start a business is a major life decision, but for small business owners in Idaho, deciding when and how to sell the business can be even more consequential.
Before selling a business, you may spend many hours and even days worrying and considering the options: Is the market right? What price should I set for my business, and is that value the “right” value? How do I get started?
There are many other factors to consider when selling your business, and without the help of experienced business advisers like Generations Law Group, you could end up on the losing end of your sale.
What should you consider before selling your business?
- Why you’re selling: Thinking about selling your business can be exciting, and there are ample reasons why people choose to do so — retirement, illness, financial return, the desire for something new, etc. But do you have a plan for what you will do once the business is sold? Will you retire or start a new business? You should reflect on your personal “why,” not only for yourself, but also because prospective buyers will want to know why you are selling.
- When you’re selling: Choosing when to sell is another major decision. Ideally, you should start making plans to sell at least a year before the deal is made. Having time to prepare will allow you to improve the business’s financial structure, internal processes and attractiveness to potential buyers, all of which could increase the sale price.
- The price: Determining your business’s value can be very difficult. The valuation should take into account the business’s goodwill, intellectual property, cash flow, customer base, and financial statements. If you have an operating agreement in place for the business, the agreement might specify the method of calculation for the valuation or how a valuation is to be made. In either case, obtaining the assistance of a qualified business appraiser is time and money well spent. The business appraisal will be used to set a sales price and provide reasoned support for the price to your prospective buyers.
- Advice from professionals: In addition to an appraiser, you should also consider involving a broker and a lawyer familiar with Idaho business regulations, like the experienced attorneys at Generations Law Group. A business broker charges a fee to help you sell the business and may be able to obtain a higher price for the business while saving you time. Your lawyer will draft all necessary legal agreements. At Generations Law Group, there is also a tax team to advise you about the tax implications of the sale and assist your accountant with any necessary tax filings.
- Are your finances in order? Before the sale, gather financial statements, tax returns, and all relevant legal documents, including employment agreements. Make a detailed list of the inventory, customers, and any real estate or current lease agreements. You should also ensure that any potential buyer signs a nondisclosure agreement to protect your trade secrets and proprietary information. Make a detailed list of what is (and is not) being conveyed as part of the sale. All of these documents are necessary to help you and your attorney prepare a sales agreement for the potential buyer. In addition, every business owner should have a written business succession plan that specifies who will take over day-to-day operations in the event of certain triggering events, such as death or disability. Generations Law Group has decades of experience in succession plans and sales agreements.
- Employees: Your employees have been the backbone of your company, and it is important to consider the sale’s impact on them. Would you like to offer them job security in the event the company is sold? Will the employees with the know-how and customer relationships agree to stay on with the new owner? You should consider how to include key employees in the process and talk with your transition team about the best way to treat the people who have helped your business succeed.
- The sale: Once your house is in order with the help of the professionals you’ve hired, the hope is that you receive several offers from potential buyers so you can negotiate the highest and best price for your business. The buyers will need time to review and verify your financials, but you’ll need help in doing your own due diligence in examining the potential buyers. That’s where we come in.
Contact Generations Law Group today
Your company is a lot more than your livelihood. However long you spent building it, selling your small business is personal, and our team at Generations Law Group knows that. Contact our office today for a consultation.