There are a number of different reasons why someone would want to put up their business for sale. These include:
• Incurring heavy losses
• An inability to attract customers
• Losing interest in that particular business and wanting to operate another business
• Cannibalization of sales by the competition
• Needing upfront cash for an emergency or a more lucrative investment
• Technological advancements rendering products or services obsolete.
Irrespective of the cause for selling your business, preparation is the first step.
When putting up your business for sale, there are certain important steps that must be taken. Adopting the correct approach will ensure that you will sell for profit, revenues and security. When preparing to sell your business, you need to take stock and prepare an excellent proposal, advertise widely through every possible route and wait for a decent buyer.
The preparation process starts with taking an inventory of assets and stocks and figuring out the net liabilities. Goodwill or business holds will have to be quantified and these factors include regular customers and visibility. The sum of taking inventory and quantifying the previously mentioned holds will provide an estimate for the value of the business. A sales pitch should then be prepared, highlighting the points above.
Scouting for Buyers
Scouting for buyers is the single most essential action towards selling your business. This is done by using all available means to spread the word around. If necessary, formal advertising methods should be explored. A first step during this process involves looking around for buyers who are within the internal environment of the business. For example, the potential buyer could include employees and suppliers. These buyers will have the ability to effectively operate the business. This is because they would have had prior knowledge of the customers, suppliers, the markets and the products and services.
If no buyer is forthcoming from the initial attempt, competitors within the same industry can then be approached. The competitor would benefit from such a purchase as he or she would get the opportunity to increase their share of the market and, in turn, improve their financials. Sometimes the unavoidability of such support services and the low turnover could contribute to the business not being viable. When a competitor takes over the business, this could eliminate the support service and the turnover could be added to the bottom line. This will ultimately leverage the advantages of the economies of scale.
There is also value in approaching someone who is totally new to the industry. Such an individual could be willing to pay a premium to get into the industry. After all, purchasing an already established business will help to eliminate certain risks associated with having to start a business from scratch.
Legal Aspects of Selling a Business
The following are areas in which you can be expertly assisted by a lawyer or law firm that specializes in commercial sales:
As the seller, you will have a clear notion of what you would like to receive from selling your business. Having a detailed consultation with a lawyer regarding the terms of your sale will provide the information needed to draw up a contract that best represents what you want from the sale. The lawyer will also offer his or her expertise concerning matters that typically arise during a commercial sale, helping you to avoid any likely pitfalls.
The lawyer and your accountant will liaise on matters that relate to taxes. This will ensure all financial matters are handled as effortlessly as possible.
The Process of Negotiation
During this phase of the sale the lawyer will address any correspondences from the buyer and his or her lawyer. You will be kept up to date with information every step of the way. Make sure you use a lawyer who is highly experienced in the process of negotiation. He or she should also be committed to making sure that you receive the best possible result from the sale of your business.
Putting up a business for sale can be a daunting process. There are a number of different factors that call for careful consideration. As such, you should ensure every aspect of the process is given due attention and thought.