Sell Your Business and Start Your Retirement
When the day comes to sell your business, it is important that prospective buyers understand why you have made this decision. Having a valid reason why it is time for you to sell can make your business more attractive to prospective buyers. After all, it is only natural that you will have to retire at some point even if the business is thriving. In fact, it is safe to state that buying a successful business from an owner that is retiring is just the kind of the situation that most buyers like
Owning a business and retirement, of course, is far different than retiring from a job. You likely have many friends ranging from vendors and employees to customers, clients and other business owners. It is vital that your departure does not disrupt the operation of your business and that prospective buyers understand that you have taken steps to ensure a smooth transition. In short, you want to create a situation in which everyone is happy once you have sold your business.
Helping to ensure a smooth transition has many parts. One of those parts is finding a buyer who will treat your people well. Another key aspect of a smooth transition is to automate as much of your work as possible before you leave. No one knows your business as well as you do, which means that you are the best source to automate and simplify the processes of your business. Outlining what steps you’ve taken to automate and simplify your business will help make it more attractive to buyers.
A key aspect of streamlining, simplifying and organizing your business is to pick out, well in advance, your second in command. Once you have decided on which person would be the best candidate, it is important that you begin grooming that person so they can take over day-to-day operations once you leave. Having a capable person who is committed to staying is a very attractive commodity for prospective buyers. A capable second in command can prove invaluable not just during the transition period but also for the long term operation of the business.
Finally, you should have set up a retirement account on which you can draw upon. Statistics indicate that roughly 50% of business owners do not have a retirement account set up in advance. If you don’t have an account set up, don’t panic, instead set one up as soon as possible.
Working with a business broker is one of the single best ways to handle the process of selling your business and getting ready for retirement.
A business broker can help you with everything from finding qualified prospective buyers to establishing the value of your business. The sooner you begin working with a business broker, the easier your transition will be.
Copyright: Business Brokerage Press, Inc.
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Avoiding Legal Mistakes When Selling Your Business
A common mistake that many make when preparing to buy or sell a business is to overlook all the various legal issues involved. A legal mistake can bring the entire process to a screeching halt or even worse case cost you a small fortune. For this reason, it is important to carefully evaluate the full slate of relevant legalities. This article will explore some of the key legal points one need to consider long before placing your business on the market.
Mistake #1 Neglecting to Have a Non-Disclosue Agreement
Having potential buyers sign a Non-Disclosure Agreement, or NDA, is critically important when selling your business. One benefit to having this agreement signed and sealed is that in the event that the deal falls through, which often happens, the buyer can’t disclose the details to other parties. However, if you don’t have an NDA, the buyer could reveal important aspects of your discussions. This could impact any future sales.
Mistake #2 Failing to Get an Experienced Attorney
There are times to cut corners, and then there are times when cutting corners or trying to save a dollar is a big mistake. Prepping to sell your business is one of those occasions where investing in good and proven counsel is a must. A good attorney can give you a range of legal moves you should and should not make.
Additionally, hiring an attorney with an established experience is just what you need to create ironclad agreements. Sellers have an array of risks that they must face when selling a business. For example, the seller needs protection from a potential buyer hiring away key employees. Without ironclad agreements and a tight NDA, a buyer could pass on buying the business, yet “steal” employees or weaken business in other ways.
Mistake #3 Skipping the Letter of Intent
Another legal way to protect your interests comes in the form of a letter of intent. This letter should be one of your key tools in negotiating the deal. Included in this letter should be a termination fee for the buyer. This applies in the event that the buyer walks away for a reason that is not the seller’s fault. Inclusion of this clause means that the seller is far less impacted if the deal does not go through as planned. Further, this clause goes a long way in ensuring that only serious buyers are attracted.
Reap the Benefits of Ample Preparation
These are just a few of the many errors that sellers often make and regret later on. It is a worthwhile investment to take the legal aspects of selling your business seriously. If you prepare for the sale of your business, you will have a much more successful experience. That means you should work with a proven and competent attorney and business broker before you put your business on the market.
Copyright: Business Brokerage Press, Inc.
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5 Things to Consider When Transferring Your Business to Family Members
Letting go of a business isn’t a process that one should jump into lightly, and that fact holds true even when it comes to your loved ones. Let’s take a look at five of the most important factors to consider when selling or transferring a business to a family member.
#1 The All-Important Buy-Sell Agreement
One of the single most valuable tools available when it comes to selling your business is a buy-sell agreement. Simply stated, this essential document puts everything in writing. In situations such as a family owned business, people may be tempted to skip a contract, but that doesn’t mean they should.
When transferring your business, you should have an expert created document in place that outlines the following:
- The business valuation
- Who is to be kept on the payroll and the amount he or she will receive
- The amount being paid
- What level of involvement you will have in the business once the transfer has taken place
#2 The Benefits of Gifting
Consider the option of gifting. Gifting can actually work to reduce your taxes on real estate, while at the same time it can allow you to maintain some level of control over the business.
#3 Seller Financing and Transferring the Family Business
Selling your business to a family member is, of course, another option. On occasion, sellers will consider a private annuity, which allows for payments to be spread out for a considerable time period, such as to the end of your life.
#4 The Self-Canceling Installment Note
Another option is to use an installment sale. If you are a selling parent and you happen to pass away before the payments have all been made for the sale, then the remaining debt may be attached to your will. This arrangement can keep your other children from paying excess income tax on your estate.
#5 Keep the IRS Happy
The fact of the matter is that the IRS does, in fact, look more closely into sales where the business is being sold to a family member. This reason alone is a good enough reason to professionally establish a real and accurate valuation of your business.
A business broker can help you work out the particulars as to how best to proceed when navigating the process of selling or transferring your business to a relative. With the right planning and preparation, selling or transferring your business to a relative doesn’t have to be an overly difficult or cumbersome process. Work with a business broker and you’ll find that the process can be smoother than you may have expected.
Copyright: Business Brokerage Press, Inc.
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How to Ensure Confidentiality During your Sale
Selling a business is a process that depends upon professionalism and confidentiality. Selecting a business broker who understands the critical role that confidentiality plays is simply a must. Unfortunately, countless sellers have in fact dealt with a situation where a breach in confidentiality has caused a deal to fall apart.
A failure to maintain confidentiality can lead to a slew of negative reactions from a range of parties. Everyone from supplies and vendors to creditors could react in a way that could harm your business, for example, vendors could change their terms and this could in turn negatively impact your cash flow.
A breach of confidentiality could also lead to negative reactions amongst both employees and customers. The reason is that employees may begin to worry about the security of their jobs and may also become nervous about the change in management. These fears could prompt employees to find a new job and leave you with a position that needs to be filled. Potentially more significant is the fact that the loss of key personnel could cause your buyer to have cold feet.
As if all of these factors were not enough of a concern there is also the issue of the competition. If your competition gets wind that you may be looking to sell they may take advantage of the situation and start attempting to steal your customers.
Finally, a breach in confidentiality could send potential buyers running. The headaches that are often associated with a breach in confidentiality are such that potential buyers may simply drop the deal.
The best way to protect your confidentiality is to opt for a great business broker. A business broker is an expert in prompting a business without notifying the competition, your employees, vendors or anyone else. The process is both an art and a science.
When attempting to sell on your own there are many and diverse pitfalls. Sellers are much more likely to accidentally reveal who you are; after all, a seller has to provide phone numbers, email addresses, physical addresses and other critical and identifying information. Even your home phone number could be traced back to your identity and ultimately your business.
A seasoned business broker can help you bypass these potentially damaging issues, by not just shielding your business’s identify but also by ensuring that all interested parties sign confidentiality agreements and are pre-qualified. In this way you only reveal what is absolutely necessary. In short, it is best to work with a business broker and maintain your confidentiality at all costs.
Copyright: Business Brokerage Press, Inc.
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Can you Understand Your Buyer’s Key Motivations?
Negotiations can be tricky affairs. One wrong move can undo a tremendous amount of work. In negotiations, it is best to take a moment and think about where the other party is coming from.
What are their needs and how best can you meet them? Understanding your buyer’s motivation increases the chances of a successful negotiation.
What Appeals to Most Buyers?
When it comes to selling a business, you likely will not know your buyer personally. This means that you will not know what they value most, how exacting their standards will be, and how easy or challenging they will be during negotiations. That’s why it is imperative to err on the side of caution and act in such a way that would appeal to most buyers.
Ensuring that your business is in strong financial health means that your business will be appealing to both a corporate executive as well as an individual buyer with a leadership/managerial background. Keep in mind that individuals who buy businesses will want a strong ROI, and often they will want the responsibilities that accompany that investment to not interfere too greatly with their current lifestyle.
Playing into Emotions
In general, buyers tend to be the most excited at the beginning of the sale process. It is at this point that you can expect your buyer’s passion to be its strongest. As a result, the first stages are when you want to keep your presentation and approach the most realistic. The reason is that once the surge of passion has worn off, your buyer may otherwise feel that you have tried to oversell your business.
Being Forthcoming with Information
It is quite common that you will not at first know if your buyer has previous experience in your market. As a result, you shouldn’t assume that they understand anything about your business or industry. In short, it is definitely in your best interest to be very honest about your business and what is involved in running it. If there are issues that they will invariably discover, then it is best to go ahead and disclose those issues early on as it establishes trust and goodwill.
Understanding Expectations
Another area to consider is what a buyer may expect of you after the sale. A buyer who already possesses a background in your niche would already be very familiar with the ins and outs of your industry. Having you around after the sale may not be viewed as necessary or beneficial.
However, with that said, the exact opposite may also be true. You may be dealing with a buyer who is in dire need of your expertise. These factors could be of critical importance in what you offer your buyer in terms of your availability. Again, that’s why it’s best to not make assumptions and make sure your terms would appeal to a wide variety of backgrounds.
An Investment of Value
Invest the time to understanding your buyer’s motivation. The more you understand what it is that your buyer wants out of the transaction, the greater your chances of focusing on the areas of your business that best match those expectations.
When it comes to the motivations and concerns that prospective buyers may have, a business broker can add a new level of understanding. The value that your broker adds to the process of selling a business is difficult to overstate.
Copyright: Business Brokerage Press
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