Should I Sell My Business? 9 Things to Consider

Perhaps you have received an offer to sell your business, or perhaps for personal reasons you are considering doing so. As varied as the reasons can be for selling a business, deciding to do so is not easy; yet at some point, many entrepreneurs will exit their business to move on to new ventures. 

There are multiple personal, financial and legal considerations that play into making the decision to sell a business. As with every step that can have serious legal and financial consequences, it is wise to carefully consider whether now is a good time to sell your business and what effect doing so will have. The ideal person to speak to about these considerations at play when deciding whether to sell your business is a Naperville, IL business attorney. 

Timing 

Timing is everything, and it is especially important when deciding to sell your business. As much as you might be ready to sell the business, doing so at the right time can make the difference between a successful sale and one that might not deliver as well financially. 

Market considerations are key here. Try to time the sale of your business with favorable market conditions for your industry – meaning when there is a higher demand for what you are selling – to the extent that you can. 

You should also consider striking when the iron is hot, meaning timing the sale of your business with a strong valuation. Additionally, you should consider whether the alternative business opportunities are better and warrant selling the business, or whether it would be wiser to wait. 

Personal Circumstances 

It is important to consider your personal circumstances and how they might play into the decision to sell your business. Ask yourself important questions about your reasons for wanting to sell the business, and how it relates to your personal plans and finances. Some questions you might ask yourself include: 

• Will selling your business at this time will work with your personal and professional plans? 
• Are there other ventures on the horizon? 
• Do you have a sense of what you want your life to look like after selling the business?
• If you are planning to retire, will the sale of the business facilitate that retirement or burden it? 

Preparation

Selling your business takes significant preparation. If you wish to sell your business, start taking steps as soon as you think you might do so to prepare for the sale. This involves properly documenting the company’s financials, ensuring that all documents are in order, and putting in place systems for operations to run smoothly. The key here is being able to persuade a potential buyer that the business can run without you. 

Due Diligence

When you sell your business, it will be subjected to a rigorous due diligence process by the buyer and the buyer’s attorneys. To ensure as smooth a sale as possible, start auditing your financial and due diligence processes early on. Ensure that the company’s legal disputes are either resolved or that there is a plan in place to mitigate the damage. Flag any financial and legal issues before the buyer has a chance to do so. Ensure all financial statements and documents are correct.

Transition Plans

Before starting the process to sell your business, ensure that you have in place a transition plan for the company. First, if there are other business owners, align with them on the decision to sell the business (or your stake in it). If everyone is on board to sell the business, ensure that all the owners agree on the goals and expectations about the sale, the proceeds, and what the day after will look like. For this latter part, decide whether you intend to stay in a consulting role after the sale or want to sever ties with the business as soon as the sale is complete. This may be up for negotiation during the sale, of course, but it is a good idea to know where you and the other owners stand. 

Valuation 

Understand your company’s valuation and be prepared to explain the reasons for it to your potential buyers. This will involve an assessment of the business’s profitability, its potential for growth, and the current market. If necessary, undertake the services of specialized accountants who will value your business. This is important not only for finding potential buyers, but for negotiating the price, and also affects timing considerations if the valuation could be increased before selling.

Tax Implications 

Selling a business can have tax implications. Speak to your attorney about the most advantageous way of structuring the deal to maximize your proceeds, whether that is an asset or stock sale. Discuss additional ways to minimize taxes, such as negotiating installment payments or financing the taxes you must pay on the sale of the company. 

Find the Right Buyer

Finding the right buyer amounts to more than financials. The right buyer is not only likely to pay the right price, but will be a person or entity who has the experience and reputation to continue taking the business you built in the right direction. This will be particularly important if other owners or employees will remain in the company. 

Employees

Consider how you want employees to fare in the sale. If you have employees with stock options, evaluate how any sale may impact them. Likewise, consider how your employees will fare after the sale. Will you negotiate to have the employees remain at the company after purchase? 

Employees are also an asset that can affect the company’s potential purchase. Consider offering valued employees incentives to remain with the company through the transition and beyond. If you discuss the potential sale with any employees, ensure that there are confidentiality provisions in place protecting that information from leaking. 

Call a Naperville, IL Business Attorney 

Circumstances change, and whether out of necessity or for growth you may be ready to sell your business. The Gierach Law Firm can advise you on the essential considerations for making this important decision. Should you choose to sell, the experienced Naperville, IL business law attorney can represent you in the sale of your business. Call our offices at 630-756-1160 for a consultation to discuss your next steps.