Laying the Groundwork for a Business Sale

May 26, 2016

Are you considering selling your small business? To ensure a successful and profitable outcome, now may be the right time to prepare for such transaction in advance.

After you’ve built your business from the ground up, being objective about its value can be difficult. Knowing what similar businesses have sold for recently can provide significant guidance. If you require a clear idea, you may consider having a certified accountant complete a business valuation.

Next, it is important to give some thought to an appropriate type of buyer – your ideal candidate. Is it a key person who currently works for your company? A competitor? Someone who just wants to buy a good business and run it but isn’t a current employee or competitor? An investor who wants to make a profit but isn’t interested in the day-to-day operations of the company? The sales price you desire will be dependent on the type of buyer being targeted.

At this point, you will also want to think about your future participation in the business after it is sold. Consider the role you’d be willing and able to play, if any, during the transition to new ownership.

Make It Attractive Before putting your company on the market, you’ll want to focus on its profitability. Taking steps to enhance the bottom line — even if it means paying more income taxes — may allow you to command a higher price for the business.

On the asset side, now is the time to identify any equipment, furniture, fixtures, or machinery that is no longer useful and consider selling or otherwise disposing of these items. That way, you’ll be able to present a leaner business to potential buyers.

It’s What You Keep Selling your company for a fair price is important, but so is securing all available tax advantages. Will you be structuring the sale as an asset sale or will you be selling your company stock? Each has different tax implications. With smart planning, you’ll be in a better position not only to command top dollar for your company, but also to minimize taxes on the sale.

Categories: Other Resources