To maximize profit and value from the sale of a business, a business owner needs to take the necessary steps to prepare their business for sale. Utilizing a “selling a business checklist” can help to ensure that all critical steps in the process are completed. Consider consulting with the experienced California legal team at Von Rock Law to obtain the legal guidance you need to sell your business successfully. Contact us at (866) 720-0195.
Deciding on the Details of the Sale
Selling a business is an important decision that involves consideration of many factors, including:
- Timing of the sale – A business owner should consider their circumstances as well as current market conditions for business mergers and acquisitions.
- Sale price – Getting the asking price right is essential for a successful sale. Obtaining a business valuation from a professional provides a good starting point for calculating a fair asking price.
Consider Hiring a Team of Professional Advisors
Selling a business is a complex legal and financial process that requires specialized knowledge in various fields. Therefore, professional advisors can help ensure your legal and financial rights are protected from the beginning of the business sale process. Professional advisors may include:
- Accountant – to assist with recording and gathering the business’s financial information in line with legal and tax requirements;
- Attorney – to provide legal advice and guidance through the sales process;
- Business broker – to find an ideal buyer and obtain maximum value in the sale of the business. A broker will also guide the business owner through the business valuation, negotiation, and due diligence processes.
Resolve Any Existing Issues in the Business
Potential buyers will be discouraged by unresolved financial, legal, environmental, or other issues that exist in the business. A business owner should therefore identify any unresolved issues in the business and work to resolve them as soon as possible. This may involve:
- Working with an accountant or attorney to resolve tax, financial or legal issues;
- Hiring a professional environmental auditor to review the business’s compliance with environmental regulations;
- Hiring a health and safety auditor to review the business’s compliance with local health and safety regulations;
- Employing contractors to fix any maintenance issues or environmental hazards.
Organize All Legal and Financial Documentation
Potential buyers are looking for evidence of a financially viable company both now and in the future. Therefore, they will perform due diligence with respect to investigating all aspects of the business before making a decision. This may involve reviewing the business’s finances, legal matters, and operational procedures, for which proper documentation is required. Organizing documentation may involve the following:
- Working with an accountant to gather and review the business’s financial and tax statements for the last five years;
- Creating a list of assets that will be included in the sale of the business, including inventory, equipment, real estate, and intellectual property;
- Working with a business attorney to review all legal matters and related documents, such as employment and lease contracts and business licensing and registration requirements.
- Developing or reviewing the business’s operations manual to ensure it accurately outlines key operational processes and procedures.
Consider visiting with the experienced business attorneys at Von Rock Law for assistance with organizing your legal documentation and understanding all legal matters related to the sale of your business.
Try To Add Value to the Business
The next step in the selling a business checklist is to add value to the business. By improving the performance of their business, a business owner can maximize the value of their business, thereby increasing their chances of achieving a successful and profitable sale. This may involve cost-cutting measures such as selling unnecessary assets and reducing waste and expenses. Value can also be added through various marketing strategies and initiatives to generate new customers and establish and maintain customer loyalty. To boost the value of their business in anticipation of a sale, a business owner might:
- Invest in advertising campaigns and promotions to attract new customers and generate sales;
- Identify new markets to diversify the business’s customer base;
- Expand and solidify revenue streams;
- Establish and renew incentives and contracts for repeat customers;
- Establish and renew contracts with high-quality suppliers and distributors.
Strategies for adding value to the business should be documented as part of a business marketing plan that can be included in the sale of the company.
Carefully Review Buyers and Their Offers
Before considering an offer, it is essential for a business owner to pre-qualify buyers so they do not waste time negotiating with those who are unsuitable for the business or cannot secure funding. A business owner should ask any potential buyer for the following:
- Financial and lender statements indicating that the buyer has the funds or financing required for the down payment and first six months of working capital;
- Proof of relevant business experience;
- Expectations for purchasing the business within a timeframe that matches the business owner’s plans for exiting the business.
Only after a buyer has been pre-qualified should a business owner divulge confidential information about the business and enter into negotiations with them. A business broker can assist with the due diligence process and negotiations to maximize the chances of a successful sale.
Complete the Sale Correctly
Once an offer is accepted, both parties must sign the closing documents to close the sale. These closing documents are the legal contracts that a business attorney and accountant should draft to help ensure all legal requirements are met and the tax consequences of the sale are minimized. Finally, the transfer of funds from the buyer to the seller takes place, and the sale is complete.
Complete All Post-Sale Tasks
Once the sale of a business is complete, there are specific post-sale tasks that a business owner will need to complete. These include:
- Filing the necessary paperwork with the California Secretary of State;
- Filing Form 8594 to report the sale to the IRS;
- Closing business bank accounts, loan accounts, and credit cards;
- Canceling general liability and other insurance policies for the business.
The Experienced Business Attorneys at Von Rock Law Are Here to Assist
Selling a business is a complex process with many steps. We can develop a specific and tailored “selling a business checklist” specifically for your business that can help to ensure your legal and financial rights are protected throughout the process. The experienced and dedicated legal team at Von Rock Law can guide you through the legal process of selling your business from start to finish. Contact us at (866) 720-0195 to learn how we can help you.