Points To Remember When Selling Your Business
13 Tips to help you prepare your business for sale
When selling your business there is a lot to think about and prepare. To help you in this process, here are several time-tested tips that every seller should keep in mind when selling his/her business. Though each business is different, most of these tips will apply to almost every business for sale.
1. Realistic Asking Price
Do not overprice or underprice your business. If you price too high you will scare away qualified buyers. When overpriced, many buyers will not make you an offer for fear of offending you. The longer your business is on the market, the greater the chance of your employees, suppliers and customers finding out. Look for comparable sales and price accordingly.
2. Information Package
Prepare a ‘business information offer’ package, which includes all the information that buyers need to see. Examples are, Current Leases, List of Chattels included, Profit & Loss Statements, special exclusive benefits to the business, etc. Buyers will lose enthusiasm waiting for these items to be produced.
3. Spring Cleaning
Bring outstanding maintenance up to date before putting your business on the market. Conduct a ‘spring cleaning’ of the business so that everything is up-to-date. When buyers see items that need fixing, they often wonder about the condition of things they can’t see.
4. Legal and Accounting Information
Gather all information that’ll be needed to prepare a Purchase & Sale Agreement a.s.a.p., in fact even before looking and finding a buyer. It’s helps put a deal together in a timely fashion when data is readily available. Lawyers are often very slow in preparing agreements and the buyer’s enthusiasm may evaporate as a result of delays.
Looking for qualified buyers has become complex and at the same time easier to looking for ready buyers in a wider area. Days of simply depending on newspaper leads are a thing of the past. A limited number of people look at newspapers for a source of suitable business advertised for sale. Casting a wider net coupled with market value pricing is the way to get many more qualified buyers.
6. Qualified Buyers
In is very important that all interested Buyers be run through a ‘qualifying ‘ test. You need to know about their financial strength and business skills of potential buyers before you provide them with highly sensitive information about your business or spend your precious time with them.
7. Franchise Agreements and other undertakings
Ensure that you have the blessings of the Franchisor and your Landlord – ensure that all your Agreements and undertakings allow for the Sale and easy transition of the business to a Buyer. Make sure that your location and equipment leases are transferable before you look for a buyer. Many deals have fallen apart because the lessors refuse to assign a lease. If your remaining lease is short, negotiate a new lease before offering the business for sale.
8. Accepting Conditional Sales
It is imperative that you agree on the sale price and terms/conditions with the purchaser before providing access to any of your proprietary data and financial records. It is extremely important that a buyer have ample opportunity to examine all aspects of your business and that you make all the required disclosures. These steps help both sellers and buyers to avoid lawsuits.
9. Confidentiality Agreements
Ensure that you have properly drafted and executed Confidentiality Agreemens from the Buyer before releasing pertinent operational information of your business. This will ensure that you are not being infiltrated with Buyers actually looking to open a competitive business of their own across the street from you.
10. Everything in Writing
All agreements and undertaking must be done in writing only. There should not be any verbal undertakings. Parties to the transaction quickly forget things that aren’t written down, resulting in arguments and lawsuits.
11. Substantial Deposits
Ensure that there is a substantial deposit with the Agreement. When you have reached an agreement with a buyer, the deposit should be held by a neutral Trust Account – preferably your Lawyers Trust Account to limit your liability.
It is preferred that the Buyer arrange suitable Financing if necessary. If you are taking-back a Mortgage or Financing part of the sale, be sure to follow the correct procedures in order to protect your promissory note. Your Lawyer will be able to ensure that proper document filing and executions of any necessary promissory notes and security agreements are in place.
Business Brokers and Commercial Realtors play a vital role when it comes to Selling and/or Buying a Business. Despite the involvements of commissions payable to the Realtor, both Buyers and Sellers will realize the informational and experience a Qualified Commercial Realtor can bring to the table to ensure good value for both the Buyer and the Seller.