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  • Connor Abene

Do's and Don'ts of Selling Your Business


Getting the highest valuation for your business sometimes comes down to the details you may have never thought about as a seller. Selling your business can be both exciting and emotional since you are parting with something that you have been working on for years.


Most sellers want a reasonable price, but also desire a trusted buyer to ensure that the business continues to flourish past their exit. This specific post will address some of the smaller do’s and don'ts of selling that usually fly under the radar until it's too late.


TO DO:


1. Run your business as usual throughout the process


Selling your business can take as little as three months and up to a year based on the size and complexity of the transaction. Too many sellers get focused on the transaction and forget that they still need to operate the day-to-day operations of the business without any material changes. Any material change could allow the buyer to back out. Continuing to operate the business is as much for the buyer as it is the seller. The buyer could back out and you could be left holding the remains of the business if you neglected it and only focused on the transaction. When considering the timeline to sell your business we recommend that you factor in the time it takes to still effectively operate your business day in and day out.


2. Verify the seller's ability to close


This will usually be during the due diligence phase that will allow you to verify all the claims of how the buyer is going to close the deal. This includes taking a look at the verification documents from the SBA, any equity capital from outside investors that are assisting in the financing, or personal financial documents proving he or she has the liquidity to buy the business. Asking for this information is entirely within reason just as he is requesting information from you about your business.


3. Be willing to share openly about the advantages and disadvantages of your company


Building a certain level of trust with the potential buyer will allow you to be more confident that they will come through pre and post close. Sharing any disadvantages with your business is much better than a buyer figuring it out on their own. Sharing these disadvantages or weaknesses will end the deal early for good reason or end up providing cleaner transaction in the end. Being transparent is truly a win-win.


DO NOT:


1. Don't forget about tax or potential tax efficiencies


Forgetting about tax efficiencies or how much will be required to be paid in taxes is often overlooked by a seller. Things such as a stock or asset sale can drive different tax liabilities for both parties. Also based on the earnings payouts, if applicable, overtime can lead to deferred taxes or larger liabilities if not used correctly.


2. Do not forget to plan ahead for when you would like to sell


Selling should never be a sudden decision. Any seller should be planning a sale for 2-6 months prior to actually listing the business for sale online. Being entirely prepared for a potential sale will make the entire process more efficient and much simpler for both parties. It will also allow the seller to alter aspects of the business as needed to ensure that you are able to get a better valuation and remove any potential risks for a buyer. This can include cleaning the books, clearing liabilities or ensuring contracts are in place that provide risk reduction to a buyer.


3. Do not assume you can do it alone


Just as a buyer will use a lawyer and accountant, the seller should be doing the same. You should already have a lawyer and tax accountant picked prior to listing your business. Too many sellers wait too long and end up with partners that they aren't entirely happy with, but do not have the time to find someone more appropriate. A seller will have to spend the money, but it is worth it when you are considering selling your business. An accountant and a lawyer can also help you prepare for a smooth sale.