Selling your business is a complex and lengthy process that requires careful consideration of many factors. Having a good team of advisors is essential.
The sales process will likely take several months to complete. Ideally, you will start preparing for the sale six to 12 months before you start the sales process. Working with a broker is a good idea if you are unfamiliar with the process and may allow you to complete the transaction in a timely manner and get a fair price for your company.
In addition to working with a broker, you will want to consult with other advisors to help facilitate the sale, such as an attorney, accountant and business appraiser.
Determine why you want to sell
Prior to starting the process of selling your company, you should think about why you want to do so. Typical reasons include a change in circumstances, a desire to retire or disputes among the owners. Having a clear vision as to why you are selling your company will help to focus your decisions and make the process much more efficient.
What are you selling?
Generally, when selling your company, the deal will take the form of an “asset” sale or a “stock” sale. An asset sale involves the sale of the assets of your company (such as machinery, equipment and inventory). Alternatively, in a stock sale you will sell the shares of stock in your corporation or LLC that owns the assets.
There are many differences between an asset sale and a stock sale, so you should seek the advice of a lawyer, as well as an accountant, when considering which would be more suitable for you.
How to prepare the company for sale
Selling a business is like selling a house in that you need it to look its best before going on the open market. This means ensuring that you have streamlined operations, minimized costs and addressed any open legal issues with your company.
The closing process
The “closing” is when ownership of the business is actually transferred. The closing process can become hectic as you near the end of the sale. Having a good team of advisors will ensure a smooth transition.
The closing can happen at the same time as the signing of the contract of sale. You can also choose to have a “dry closing,” where you sign the contract of sale first, then conduct due diligence, arrange for financing and complete the closing process.
