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Preparing to Sell Your Business
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Business owners prepare to sell their business when the company is facing financial difficulties and needs help, or they sell when they are ready to retire. The transactions are complete and require a better understanding of commercial real estate and business laws.
A broker helps the business owner prepare for the transaction and prepare all documents required for the transaction. Defining proper terms in the sales contract could help the business secure employment for their workers. Reviewing details about preparing to sell helps business owners get ready for their new life after the sale.
Assessing the Value of the Company
A complete appraisal shows how much the company is worth. Buyers will want to know the net worth of the business and how much it earns each year. Setting the value ahead of time makes things easier when working with a broker to sell the company. The pricing must be realistic and shouldn’t be inflated just to make extra money. For example, if the company is in financial trouble, they must disclose this information to potential buyers.
Prepare Financial Records for the Business
Getting financial records in order gives the potential buyer detailed information about the business. It also ensures that there were not any instances of fraud or hidden monetary assets. The financial records must reflect the company’s sales and expenses for at least ten years. The data must show the financial status of the company and all outstanding debts. When purchasing the company, the buyer must have accurate records for expenses, investments, and incoming profits.
Reviewing the Business Assets
The business assets start with the commercial property, and all physical locations owned by the company. All machinery, equipment, furnishings, and financial holdings are disclosed to the buyer. The owner must review all assets to determine what they to include in the business sale. The business owner could transfer assets they want to keep into a trust and separate them from the business. When selling the business, the owner isn’t required to sell all of their assets as long as the business owner owns the items personally.
Set Up Plans for Selling Current Products
The business must present a plan for continuing to sell their product or service. They must disclose the plan to the buyer. This includes marketing plans, merchandising, and online sales efforts. The company must continue to generate profits even if it is up for sale. The plan must explain where the products are sent, such as retail stores and other companies that have contracts to sell the company’s products. The plan must show steady growth and enable the new owner to take over and continue to earn profits through the business.
Define a Plan for the Transition
Business mergers and transition require the current business owner to work with the buyer to transition the company to the new business model and prepare workers for new management. The transition applies to all departments in the business, and the workers will undergo training courses according to how the buyer conducts their own business. All workers must be on-board for the changes and ensure that changes are completed without major issues.
Assess Buyers by Qualification for Financing
Pre-approvals for financing are a must for all buyers who consider purchasing the business. The broker evaluates all prospective buyers according to if they have pre-qualified for financing or have enough capital to purchase the business. The brokers won’t waste their time with any buyers that cannot provide evidence of these qualifications. Without proper financing, the business deal will not happen, and the broker will introduce qualified buyers to the business owner and discuss the real estate transaction. The buyers must be approved for at least the asking price for the business. This doesn’t mean that negotiations won’t occur, but the buyer must have pre-approval to show they are serious about the purchase.
Consult With Business Partners and Manage Existing Contracts
A complete review of all existing contracts defines what obligations the new owner must fulfill. When taking over the business, the buyer must complete all obligations in existing contracts unless the seller has made other arrangements with their business partners. They must define these obligations in the sales contracts, and the buyer must know all requirements before they complete their purchase.
Some business owners may allow a buyer to buy out the contracts themselves. This allows the business owner to get all their earnings from their existing contracts, and their business partners are managed properly. If they have contracts with retail stores that sell their products, the new owner will need to set up supplemental contracts themselves after the business sale is completed. The terms of the contracts dictate what is expected by all parties.
The Terms of the Sales Contract
The terms of the sales contract define everything that comes with the business, including a complete catalog of all business assets and their value. The terms of the sales contract define the responsibilities of both parties during a merger or transition to new ownership. They detail all contracts that must be fulfilled in the sales contract to define the new owner’s responsibilities. They list the purchase price and all fees in the contract to ensure that each party pays related fees at the closing.
Business owners work with brokers to sell their companies and complete complex processes. A broker understands the ins and outs of selling a business and defines the obligations of each party. In a business sale, the current owner must provide all financial records and access to business-related assets, including data stored on the company server. The seller must disclose business secrets to the buyer through the transition phase and explain how the company operates currently. The buyer can change company policies when they take over the company and begin management. Reviewing the terms of a business sale helps business owners decide when they are ready to place their company on the market.