Considerations to Make Before Selling Your Business

Deciding to sell your business is one of the biggest decisions you will ever make. It may be the biggest business decision you’ve made since deciding to open your own business in the first place. When selling a business, most business owners focus on 2 questions: how much money can I get for my business & when will the sale happen?

There are several factors that will determine the answers to these 2 questions, including the business valuation, the business history, & the current marketplace. What many business owners overlook is the impact of their own decisions during the sales process that will ultimately help determine both the sale price & timing. Before you sit down at the negotiating table, answer these common questions we found on the IBBA website:

  • Financing – Do you prefer a higher offer with some seller financing or a lower offer with cash at close?
  • Transition – Are you looking for a quick exit? Does the buyer expect a lengthy transition?
  • Employees – Sellers are often very protective of their employees. Will the buyer relocate or replace staff?
  • Ownership – Are you looking to maintain a minority stake for yourself or your family?
  • Legacy – Most sellers don’t want to cash out and watch the company erode. Ten years from now they want to look at a successful business that they had a hand in building.
  • Real Estate – Is the buyer interested in your building? If the buyer doesn’t want your facility, how soon can you fill it?
  • Trust – Do you trust the buyer? Some sellers will pass up higher offers to work with a buyer they feel better about.

As they state on their website, “even if you know your preferences, you may not get everything you want when making a deal.”

Negotiating the Sale

The negotiation process for your business begins the day you decide to sell it. From marketing to valuation to drawing up contract paperwork, negotiations really begin on day 1 of the selling process. Many times, your preferences will influence, or even dictate, the outcome of the sale.

Prepare for SuccessHere are a few additional, critical elements to the negotiation process:

  • Terms
    • Asset sale vs. stock sale
    • Allocation of purchase price
    • Buyer’s financing the transaction
  • Tax issues
    • Real property taxes
    • Deferred taxes
    • Corporate taxes
    • Personal taxes
  • Transition Issues – training periods
  • Non-Competition Agreements
  • Closing Schedule
  • Contingencies
  • Earnest Money

The IBBA article states, “be sure your priorities are well thought out or you might give a buyer the wrong impression which can have serious consequences.” They go on to explain how an owner’s involvement after the sale can be misunderstood if communication is not clear. As business brokers, we’ll help you navigate this entire process, from understanding your options to clearly delivering your intent to the potential buyer.

Selling Your Business to the Right Buyer

Finding the best possible buyer means truly finding a great fit for your specific needs. While the marketplace in the South, especially in Nashville, has been great recently for sellers, it’s important to consider all the aspects of the sale that will ultimately determine how happy you are with the end result.

For example, the IBBA site raises a couple of good questions, “Would you consider a lower price for a buyer that fits the company’s culture? Would you consider an offer that’s a million dollars lower if it meant the difference between years of seller financing and cash at close?”

Each person’s situation is different, and we’re here to help you ask the right questions, to find the right buyer for your situation and your business. Because it can be a long process, your time as the seller is better used maintaining the business. A business broker can be your best friend. A good broker will help you maximize the price and minimize the selling time.

The Alliant Process

Our  business brokerage services include the following:

Learn more about the Alliant Process by watching the video below.