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10 Things to Consider When Selling Your First Business
Posted by Kanika Sinha
November 3, 2023
A lot goes into this critical financial and emotional decision. Make sure you have the right tools.
The decision to sell your first business can be very emotional and challenging, followed by an arduous process. Whatever your reason for selling your business, it’s essential to find the right buyer. After all, the valuation comes from your years of hard work and the brand equity you’ve built from the ground up. So whether you’re looking to finally put together a nest egg for retirement or just looking to explore new avenues — it’s necessary to get the best price for your hard work.
In preparation for the sale, there are practical necessities to consider — including the readiness of the business, market conditions, and potential buyers. As soon as you’ve decided to consider selling, it’s best to start planning the next steps.
Here are ten things to consider when selling your first business
1. Determine your business’s fair market value
One of the first steps when preparing to sell your business is to value it accurately. Ensure a bank, buyer, or business appraiser has independently validated your asking price.
2. Assemble your team of professionals
You’ll need legal, tax, and business advice to ensure the transactions go smoothly. At a minimum, get a qualified accountant, tax attorney, business broker, and transactional lawyer on your team.
Additionally, having the right team by your side can help ensure the best options and alternatives are part of the discussion.
3. Identify your reasons for the sale
Seek clarity on the factors that have led you to sell your business. Whether it’s to pursue new opportunities, disputes, or retirement — understanding your underlying reasons can help you better shape your sales strategy and its outcome.
4. Get your financials in order
Ensure that you have organized and clean financial reports. These include a complete balance sheet, income statement, and profit and loss statement clearly outlining critical business metrics.
Buyers may want to review copies of your business’s material agreements. So keep documents like crucial customer and supplier, shareholder agreements, and employment agreements on hand.
6. Ensure emotional preparedness
You may be ready to let go of your business. Still, the selling process, which sometimes takes a year, can be emotionally draining.
Ensure that you’re emotionally ready for the transition when it occurs. You can even consider planning your exit strategy to remain objective during the sale process.
7. Assess business readiness
When contemplating a business sale, it is not only your financial and emotional preparedness that matters. Your business also needs to be in the right state.
Address your business’s weaknesses, if any, beforehand so that you increase its sale price. Work with your employees and customers on how you can improve the company.
8. Keep empathy and perspective
Buyers are likely to view your business critically, and sometimes, the truth can be hard to swallow. Refrain from letting their opinions feel like a personal attack if the results differ from what you expect. Instead, stay level-headed during the process.
9. Consider tax implications
A business sale often carries a hefty price tag, resulting in greater tax liability. Consider the tax implications of selling your businesses beforehand to ensure you’re well-prepared and can reduce your tax burden.
10. Don’t forget your employees
Before putting your business up for sale, you should get a good understanding of its impact on your employees.
Consider whether the buyer will take on all the obligations towards your employees in your business. And if not, how do you plan to pay for the severance and support your employees during the transition?
The final word
Selling a business is a complex and time-consuming venture. Your personal and business readiness can ease the burden, as can the help of a team of professionals.
Want to get more for your startup? Escalon can help ensure that your accounting, financial records, and taxes are accurately done and that they communicate the total value of your business to potential buyers. Talk to an expert today.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact ushere.
Kanika is an enthusiastic content writer who craves to push the boundaries and explore uncharted territories. With her exceptional writing skills and in-depth knowledge of business-to-business dynamics, she creates compelling narratives that help businesses achieve tangible ROI. When not hunched over the keyboard, you can find her sweating it out in the gym, or indulging in a marathon of adorable movies with her young son.