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Selling Your Business - « back to Articles

Your private company will some day change ownership whether to your heirs, a partner, or an outside third party. It is important to know your position in terms of the dollar value of your business.

An important first step is to have your company valued. There are many methods of valuation; it would be wise to consult a Management Consultant who is qualified to act as a business evaluator.

The process of evaluation can have important results, even if you do not have immediate plans to sell. It will increase your awareness of the company strengths and weaknesses; particularly from the view of a prospective buyer. That knowledge can often improve your business's performance and profit.

Discuss your plans to sell your business with your Management Consultant, your accountant and your lawyer. They may have contacts or clients who would be interested in your business.

It is important that your major business associates learn of your intentions to sell from you rather than through a business grapevine. Letting them know personally will keep their confidence in you and your business high and enhance their willingness to continue to do business with your successor, which makes your business more attractive to buy.

Take time to decide about when and how much of your business you will sell. Points to consider include:
  • whether to leave the business completely or stay on in a management capacity with the new owner.
  • determine what form the proceeds of sale should be, cash or some other arrangement
  • determine the minimum price you are prepared to accept
  • whether to sell your company's shares or assets
  • best time to sell.
A prospective buyer may have strengths or skills in a related industry and your business may be a natural extension to this existing business. Attempt to ensure the buyer has the abilities to run the business; if the buyer is not qualified to run your business, you may not ever be paid in full and could find yourself operating your old business once again.

Ideally, you should try to sell to an individual or company that has the expertise, facilities, or management ability to obtain an even greater return of investment than you did running the same business.

As you begin your negotiations try to establish that the buyer is serious and has the resources to conclude the deal, before divulging too much private information. Document all steps of the transaction, even if they seem unimportant at the time. Selling a business is primarily a matter of common sense and very much like buying or starting a business. Take the same level of care and precautions selling as you would buying.

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