The time has come – you’re ready to sell the business you’ve built over the course of years or decades. Every business owner has their own reasons for selling. You may be ready to retire or move to another city. You may simply be looking for a new challenge or venture. Your sales may be down and your business may need new capital or management to continue competing.
Whatever the reason, selling a business involves more than simply putting up a “for sale” sign on the front window. Preparing for a business sale with a winning strategy will net you better-qualified buyers and a significantly more profitable transaction.
With the right steps, you could get the best possible value for your business, one that reflects all the hard work you’ve invested into growing your company.
How Do You Prepare Your Business for Sale?
First, you’ll want to get a business lawyer involved as soon as possible. You should never go into a business purchase transaction without legal representation. A business attorney can help you not just execute the sales agreement, but also position your company in a way that makes it more appealing to potential buyers. The sooner you get started with counsel, the better.
Your reasons for selling your business will play a big role in shaping your business purchase transaction. After all, one of the first questions an informed buyer will ask is why you’re selling. The negotiations will proceed differently if you’re selling because your company is losing revenue versus selling a profitable company from which you’re retiring.
Second, you should determine what would be a successful outcome from the business sale. Is your goal to sell above a certain price, stay on board as a consultant, ensure your company maintains its original vision, or protect the jobs of your employees? Your lawyer can help you establish baselines for success then target those goals in your strategy.
When Should You Sell Your Business?Theoretically, you can sell your business immediately – as soon as you make the decision that you want to sell. But if you sell right away without getting your company’s affairs in order first, you could be leaving a lot of value on the table.
Think about selling a business similar to selling a home. According to a study by the National Association of Realtors, homes that are staged to be attractive to buyers sell faster and for more money than those that are not staged. The same goes for businesses.
By taking the time to prepare your business for sale, you can address and overcome your company’s weaknesses to make it as attractive as possible to prospective buyers. This could take just a few months or more, depending on what types of adjustments are needed. The difference could mean hundreds of thousands or even millions of dollars.
You can also time the sale of your business with other opportunities in your industry. For whatever reason, your industry may be booming – that could be a high-value time to sell. Conversely, if you’re still profiting in an “endangered industry” that’s shrinking in demand or value, you may want to sell sooner rather than later.
Your attorney can help put together an action plan for selling your business that takes into consideration your personal motivations, time limits, and sales goals.
Preparing Your Business for Sale Checklist
Every business is different and yours will benefit from a tailored approach. Your lawyer can help you get through the steps below to set your business sale up for maximum success.
To get your business positioned for its best chance at success, call the Philadelphia offices of Holmes Business Law at 215-482-0285 or use our contact form to get started now.
Buying a business is an exciting time for any entrepreneur.
By purchasing an existing business, you can avoid many of the risks that come with starting a venture fresh from the ground up. The company you plan to acquire may already enjoy brand recognition, a solid customer base, or profitability. You can infuse a growing business with new capital and build upon its proven formula for even greater success.
But you must do your due diligence before you commit to purchasing a business or any business assets. One of the most important parts of a business purchase transaction involves establishing the worth and sales price of the business.
The only way to find out how much a business is worth is to evaluate the financial records and daily operations of the company – ideally, with the help of a trained professional and negotiator.
Despite being a business transaction, emotions can skew the perceived worth and value of a company. You may get excited and emotionally invested when you find a business you really love. Plus, the current owner has probably poured their own time and money into the venture. To them, the company may be worth much more than the number on paper.
The more thorough your due diligence, the stronger your position will be at the negotiation table. The last thing you want is to buy a business without an accurate understanding of its prospects and liabilities. You could end up overpaying or even worse – taking on unknown risks or debts that could sink your investment after the ink has dried on the sale.
How Is a Business Typically Valued?The process of valuing a business isn’t always as objective as you might think.
Even with advanced appraisal formulas, the future is impossible to predict. Your evaluations can certainly get more confident with the more evidence you have. But many aspects of appraising a business are subjective or intangible – for example, determining the value of brand recognition or customer goodwill. You and the seller may disagree on how much these are worth.
Even if there is no “perfect price,” you can use different valuation formulas to get to a reasonable price range that both buyer and seller can agree upon.
You don't want to take any shortcuts when evaluating the worth of a business. You want to make sure you've left no stone unturned so that you don’t encounter any surprises later on.
How Do You Determine the Value of a Business to Buy?When determining the price of a business you want to buy, you can expect to negotiate within a price range with the seller, taking into account the company’s financial health.
The lowest end of the price range would cover the current market value for any of the assets the company still owns, minus its debts. This might be the case if a company is going out of business and liquidating its assets – and you don't plan to continue operating it.
The higher end of the price range would cover any business assets plus expected earnings for the future. If the business you plan to buy has a solid reputation and strong customer base with a high likelihood of increasing revenue and profits, that will affect the purchase price.
But assets and revenue aren’t the only factors to consider in a business purchase transaction.
When you buy a business, you get more than just a company. You could be investing in a personal dream, a lifelong goal, or a new adventure. You want to make sure you get the most of the new venture you’re getting into – and the best way to do that is to have a business lawyer on your side, covering your back and watching out for unexpected curve balls. You want a seasoned negotiator who can get you the best deal possible.
Thinking of buying a business? Get the experts on your side. Call the Philadelphia offices of Holmes Business Law at 215-482-0285 or use our contact form to get started now.
A proper partnership agreement makes your new venture real. But the success of your business partnership depends on several intangible key factors that you must consider from the outset.
Sure, your partnership may look great on paper. But how well do you and your partners actually work together? Do your values align? Can you trust each other?
Starting a partnership? Welcome to the beginning of an exciting new venture! You and your partners have ideas, dreams, and funding – and you’re ready to hit the ground running.
The first steps you take to establish your partnership and create a partnership agreement are absolutely critical in helping you reach your vision. Whenever you go into business with a partner, you want to make sure you’ve got all your legal ducks in a row before the rubber meets the road. The last thing you want is to hit a snag while you’re going full speed ahead.
Just this month, President Joe Biden signed a major executive order limiting the use of non-compete agreements. Executive Order 14036, “Promoting Competition in the American Economy,” encourages the FTC to crack down on the “unfair use” of such agreements.
The executive order helps workers. But what about businesses that rely on non-competes to keep employees from taking their trade secrets to competitors? Half of private-sector businesses use non-compete agreements for at least some of their employees.
Since the COVID-19 pandemic, remote work has become an undeniable reality for much of the U.S. For over a year, millions of offices stood empty. Zoom and videoconferencing replaced in-person meetings. Even interviews became remote.
The world of remote employment is the new frontier for many companies who previously maintained in-person workplaces – with pros and cons.
For many medium-to-small-sized companies, managing the myriad of federal and state compliance regulations is a top challenge. With limited resources, keeping up with the many changes that continue to impact the current business landscape is a daunting task.
Here are five things that every business owner needs to understand when hiring employees.
Plus: Employee Vaccination Policy Template for Employers
Businesses and offices are opening up now that vaccinations have become widely available across the United States. Still, the U.S. population is yet to reach herd immunity – and the risk of contracting or spreading COVID-19 remains. If you're an employer, you want to make sure that your employees, customers, and their families are protected against the coronavirus before you start to reopen your workplace with fewer pandemic restrictions.
So what options do you have if an employee refuses to get vaccinated?
If you want your small business to succeed, a crucial step is to establish business credit. Good business credit will benefit your business in several ways, including:
The following are eight steps you need to take to establish business credit.
The Difference Is Extremely Important Under the Law!
If you live in the United States you’ve probably seen the TM (™) and R (®) symbols used in everything from advertisements to product packaging. But what do these symbols mean? And which one can you use for your own branding?
Both TM and R protect your intellectual property rights in the American marketplace. If you’ve built a strong company reputation or cultivated a market of loyal customers, your IP or brand name could be the most important or valuable part of your business. Both the TM and R symbols signify that the brand name or logo has some level of legal protection.
Sarah E. Holmes is a Philadelphia business attorney and strategist that helps start ups and established businesses looking to expand, protect their assets and increase their profits in an approachable, down-to-earth way. When you're looking for a business lawyer in Philadelphia, the Main Line or New Jersey, we can help.