How to Get the Best Value From Selling Your Business

You've poured time, money, sweat, and love into building your company. Now, you’re ready to sell your business and reap the benefits of all your hard work.

The right business purchase transaction can sell your business at a profit while the wrong approach can leave you worse off than you’d hoped. Although your business is a professional venture, building something from the ground up makes for a personal and emotional undertaking. Most business owners feel some pride of ownership over what they’ve accomplished – and rightfully so, as building a successful business is anything but easy.

You must do your due diligence before you sign away your business rights to someone else. The last thing you want is to have your hard work stripped from you without proper credit or compensation. You want to make sure all the important issues have been considered and addressed before the ink dries on your business purchase agreement.

The best way to protect your interests in a Philadelphia-area business sale is to hire a local business lawyer to help with the process. Your attorney can help:

• Evaluate your market for the best opportunities
• Represent your business interests and personal goals
• Bring in experts to appraise the value of your business and its assets
• Negotiate the terms of your business purchase agreement with the buyer
• Manage your newly acquired wealth after the purchase transaction is complete

Every business and market is different, which is why the same business purchase agreement won't work for any two separate transactions. Using a common template for your transaction would be a mistake – your business purchase agreement should reflect the unique understanding between you and the buyer of your business.

Preparing to Sell Your Business
The process of selling your business can be time-intensive, emotional, and filled with ups and downs. A business lawyer can help make the process go smoother from the beginning. Starting on the right foot can position you for the best success.

First, you should establish why you're selling your business. Any potential buyer will want to know and the answer will set the tone for your negotiations.

• Are you retiring, overworked, or simply bored and want to explore other markets?
• Has there been an illness or death that makes it more difficult to run the company?
• Do you have partner disputes you can’t resolve?
• Does your company need restructuring?

Second, think about what you want your role to be after you sell your business.

• Do you want to stay involved in the business in any way moving forward?
• Would you like to remain a shareholder even if you’re no longer involved in operations?
• Would you prefer to keep any intellectual property rights or are those also for sale?

Third, consider why someone would want to buy your business. Is your business profitable? The answer to this question will affect its ability to sell and the sale price.
You can show documentation to prove:

• Your company’s earned profits,
• Your steady or growing income,
• The value of your customer base, or
• Any lucrative long-term business contracts that you hold.

Imagine yourself as a buyer looking to purchase your business. The less organized you are now, the more work the buyer will have to do after the sale. A poorly managed company can lose points for this over the negotiation table. The more transparent your operations are now, the more attractive your company is for a buyer considering the future.

It's never too early to start planning to sell your business if that's your ultimate goal. The sooner you get started, the better you can develop your business strategy, record-keeping practices, customer engagement, and management operations to that end.

Valuing Your Business for Sale
Business negotiations start and end with price. How much do you sell your business for?

A prospective buyer will approach you with a Letter of Intent (LOI) that includes their offered price. How you respond depends on how you value your business.
When it comes to appraising the value of your company, accuracy is key. Pricing too low can cheat you out of the profits you deserve while pricing too high can derail the deal.

Valuation involves looking at both the intrinsic aspects of your business and any relevant extrinsic factors out in the world. When valuing your company, you must consider:

• How much profit does your business generate?
• How is your industry currently performing?
• How is the industry forecast to perform in the future?
• How are other similar companies doing?
• What is the general economic outlook?

You still have options even if your company isn’t turning a profit. Your business can have value in other ways. You can sell your entire business or just your business assets. You may have excellent brand recognition (intellectual property value) or a deeply engaged customer base. You may own thousands of dollars of equipment you can resell.

Your lawyer will help assess your situation and make the best decision that matches your goals. While a business broker can help find a buyer for your business, your legal team makes sure your interests are represented in your business purchase agreement. That means drafting the terms of your agreement according to the outcome of your negotiations.

Other Considerations for Selling Your Business
Selling your hard-built business to someone else can be a challenge, not to mention an emotional experience. If you're closing your business and selling your assets, you may not care who buys them as long as the deal is quick and profitable. But if you care about the company continuing your vision, you may want to sell only to someone you trust. This is especially true if you expect to enter into a partnership or shareholder agreement under the terms of the sale.

You may have a buyer in mind already – maybe even an employee who’s ready to take over for you. When it comes to buyers outside your company or industry, you should investigate their background as much as they evaluate your business.

• Why does this buyer want to buy your company?
• Does the buyer’s vision align with yours?
• Does the buyer have any experience in your industry?
• Do they have an established record of owning your type of business?
• Are the buyer’s financial and operational procedures transparent and sound?
• Is your buyer’s business culture a fit for your company?
• How much ownership interest will each of you have?

You should always have legal representation for complex transactions such as business purchases. Your legal team will help you draft a business purchase agreement that includes the contracts and terms for selling your business or assets. Once the transaction is complete, your lawyer can help you manage the profits you receive from the sale.

Ready to get started? Call Holmes Business Law today at 215-482-0285 to talk to a Philadelphia lawyer about your options for selling your business.

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