When you’re considering selling your business, it’s essential to think about all the aspects. The process can be lengthy emotional and expensive. It also involves the transfer and ownership of assets, that require a lot of documentation.
Generally, the size of the company determines whether it can be sold as an independent company or through a broker. Brokers are used to sell smaller businesses as their buyer pool is more restricted. Selling your business can be a challenging process that requires planning and preparation.
An appraiser who is qualified can offer a thorough appraisal report with documentation to establish the value of your business. The appraisal is usually based on a multiple of revenue or annual net income. The number of times this will differ depending on industry and type of business, and is the starting point to determine the price you will sell your business at.
Before selling, make sure your financial information is in order and your equipment inventory is up-to-date. You will need to prepare three years worth of tax returns as well as financial reports for potential purchaser to review. Being prepared with these documents can speed up the selling process.
During the negotiation phase, buyers can ask for different conditions to be added to the sale agreement. Common demands include guarantees on salary, equity stakes and stock payouts. You might want to seek the help of an accountant or lawyer before agreeing to any terms because they can provide a detailed explanation of how these clauses affect your profits from the sale.