As a small business owner and business lawyer at Dalton & Tomich, PLC, I can attest that owning and running a small business is not for the faint at heart. Selling one isn’t either.
Selling a small business is not something one can do on the open market, so finding an interested buyer is half the battle. The other half is closing the sale; and without proper counsel, it can be a real challenge.
Here are seven things to consider as you prepare to put your business on the market:
- Clean up your corporate documents and make sure your books are in order. Corporate cleanups are a very popular tool for my clients.
- Maintain a regular accounting system. Work with an accounting professional to make sure your balance sheet is appealing to a prospective buyer.
- Confirm written contracts are in place with the company’s main customers and vendors and that those can be assigned.
- Look at returns for your industry and the average method of price computation. Be prepared to support the asking price with facts and a formula.
- If real property is involved (for example, land or buildings), make sure the title is clean, especially if it was transferred over generations or not held by a corporate entity.
- Consider how the deal should be structured, whether it is an asset purchase or stock purchase. There are advantages and disadvantages of both. Think them through in advance.
- Decide how you want to structure the sale – will it be lump sum, installment, or an earn out?Each has tax consequences and benefits that vary depending on the type of business.
Once the deal closes, you can think about what’s next and what to do with your newfound liquidity, and free time. Please contact me if you are considering selling your small business.