You burned the candle at both ends – and likely overcame many challenges – to build up your very own successful business. Now, however, it may be time to sell your dear company and move on. Before you move forward, it’s a good idea to double-check if selling is, indeed, the right call to make. We mean this both in a financial sense as well as in terms of your own life fulfillment.
by Eleanor Wyatt
Image via Unsplash
Today, SmartBizOpps.com shares some common signs that indicate it’s time to sell. We also cover the practical sale-related considerations, including how to move forward if you do decide to move forward with the sale:
Signs it’s Time to Sell
Typically, people decide to sell their businesses for one of the reasons mentioned below:
- There’s no enjoyment left: When you’ve been doing the same thing too long, you may find it hard to be engaged.
- Business-related challenges: Changing market conditions, too much competition, lack of expertise, and lack of sustainability may cause you to quit.
- You have a very good offer: You receive an offer from an investor or other business you can’t pass up.
Personal reasons are forcing you away: Sometimes life interferes with our plans. You may have no choice but to walk away.
Selling isn’t Your Only Option
Keep in mind that selling isn’t your only option. Here are some things you could do instead:
- Holding on to a partial stake: Some businessmen decide to offload a partial stake in their company. If the company becomes profitable later, they can offload their stake for more money. SecureDocs covers four other scenarios where partial divestiture makes sense.
- Taking a different role: If you’re hit with ennui, you could try a different role. For instance, you could hire a CEO for the day-to-day operations and do something you enjoy instead.
Taking the company in a new direction: You could take the company in a new direction – like launching a new product or service in a different niche.
Consider Higher Education
If the lack of skills or expertise is holding you back, it’s never too late to pursue higher education. For instance, you could return to school to pursue an advanced degree. A master’s degree would help you to learn management, leadership, and other skills that you need to move forward with your business and avoid mistakes. These skills would also help you to sell your business more profitably down the road, if necessary. These days, thanks to online degree programs, you can run your business while studying.
Get Everything in Order Before Making the Sale
Have you determined that selling is your best option? You need to get your house in order before you’ll be ready to sell. Here are some top considerations:
1. Make sure to file your annual report
As you likely know, you’re required to mention important changes to your company – like a new address, name, members, or shares – in your annual report. Failure to file the report and not mentioning these changes could lead to your state imposing fees or penalties on you. In some cases, your right to conduct business may be taken away.
2. Organize your finances
Having organized finances is essential – both so you have a clear picture of your financial health and also so you have something to show to potential buyers. Invoicing software can help you to keep accurate books, not to mention get paid faster if you have outstanding dues to receive. Accounting software that works for your company the best would be something that allows customers to pay online and comes with features like scheduled invoices and customer view notifications.
3. Consider the other legalities
Selling a business requires serious legwork in other ways. You need to think about employee contracts, intellectual rights, taxes, and the management of the business before, during, and after the transition period. You’ll have to inform your teams about the upcoming change in ownership, and what it may mean for them.
Consider Hiring a Consultant
Hiring a consultant can be worth your time. They can help you with laying the groundwork we mentioned above (or at least point you in the right direction). Also, they can help directly with the sale by helping you find leads, coming up with a realistic figure, and more. Entrepreneur talks about when it’s a good idea to hire a consultant.
Sell Your Company
Next comes the hardest part: actually selling you company. Unless you have an immensely successful business, you’ll have to spend time and energy finding buyers and then convincing them to buy you out. This will involve market research, generating leads, and countless meetings.
When you find a buyer, read the fine print before you sign a contract. You will need to consider clauses like non-compete, indemnification, materiality, and more because they could affect your future career or business. Furthermore, read up on EBITDA clauses – some buyers refuse to offer a full payment until a certain earning target is met.
Financing the sale may involve taking out an SBA loan
Last, but not least, be aware that selling your company isn’t always as straightforward as receiving a full cash payment upon closing the deal. The buyer may ask you to help with the financing, for instance. Often, buyers and sellers take out SBA loans for 90 percent of the purchase price. Some advantages are a lower cash payment for the buyer, tax savings for the seller (you), and more cash flow for the business.
Conclusion
It’s a good idea to take your time when finding buyers for your business. Not only does this allow you to get a good deal. But you’ll also be able to ensure you find someone you can trust with your legacy. You don’t want a buyer to run it into the ground, after all. Plan things out for the best results.
SmartBizOpps.com was built and designed by entrepreneurs for entrepreneurs, our directory features in-depth and accurate research about Business Opportunities and Franchises. If you have any questions, we’d love to hear from you!
Sources and further reading
- Fund your business (U.S. Small Business Administration): Funding options including self-funding, crowdfunding, and small business loans.
- Small Business and Self-Employed Tax Center (Internal Revenue Service): Tax forms, publications, and guidance for small businesses and the self-employed.
- Manage your business (U.S. Small Business Administration): SBA guidance on finances, hiring, taxes, marketing, and cybersecurity.
SmartBizOpps provides information only and does not guarantee income, leads, or results.
Photo by Sebastian Herrmann on Unsplash
For more background: KPMG.
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