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Selling your business

When you make the decision to sell your business, closing the sale is only part of the process. Some additional points to consider can include: your reason for selling, the information you will need to gather, the value of your business, maintaining confidentiality, the buyer’s perspective, hiring professionals, and studying the offers. If you have employees, you will also want to inform them of your plan to sell the business.

HAVE A VALID REASON TO SELL

A potential buyer will often want to know why you are selling your business. By providing a valid reason you can help the buyer make an informed decision.

Some of the most common reasons for selling a business are:

  • Personal reasons: A change in an owner’s personal life is one of the most common motives for selling a business. Personal reasons can include changes in health, family obligations, retirement or unexpected emergencies.
  • Desire for personal liquidity: When most of your personal wealth is invested in the business, the prospect of a sale offers an opportunity to convert the holdings into cash and diversify your investments.
  • Need for a change: Many entrepreneurs look forward to reducing the pressure of owning a business so they can pursue other interests. Selling the business offers a change of lifestyle or new professional opportunities.
  • High risks and personal liability: Liabilities like taxes, product liability, and personal guarantees of the company's debts can build up over the life of the company. Selling the business can often relieve you of this financial burden.

GATHER THE INFORMATION YOU NEED TO MARKET AND SELL YOUR BUSINESS

There are a number of documents that may be required when you sell your business, including:

  • three years of financial statements
  • three years of tax returns
  • various certificates of clearance
  • list of fixtures and equipment
  • approximate value of inventory
  • list of employees
  • customer lists
  • copies of the lease
  • the franchise agreement (if applicable)
  • list of loans with balance and payment schedule
  • copies of equipment leases
  • names of outside advisors (e.g. - business broker, lawyer, accountant)

MAKE A REALISTIC VALUATION OF YOUR BUSINESS

The selling prices of similar businesses in your area can give you an idea of what your business may be worth.

When determining the value of your business, it is important to consider both its physical and intangible assets. Buyers may be willing to pay a higher price for an established business with intangible assets, which can include:

  • the reputation of your business
  • the trust of your clients
  • your customer care skills
  • expertise your business has gained over time

MAINTAIN CONFIDENTIALITY

To avoid giving away information that can be used to compete against you, provide financial information only to serious potential buyers. You may also ask a potential buyer to sign a non-disclosure agreement.

THE BUYER’S PERSPECTIVE

Present your business to a buyer the way you would want to see it if you were buying the business. Make sure that buyers are aware of the profitable aspects of your business. 

CONSIDER HIRING PROFESSIONALS

In some cases, you may want to hire a business broker or lawyer to help you sell the business.

Some of the advantages of hiring a business broker are: 

  • A broker can act as an agent for you and save you time by dealing with potential buyers on your behalf.
  • Some prospective buyers may be more comfortable talking to a professional intermediary.
  • A broker specialized in a particular industry may have contacts would be interested in buying your company.

A lawyer can be consulted for assistance with any legal matters, such as:

  • preparing a summary of your business for potential buyers
  • writing a purchase and sales agreement
  • writing or reviewing any contracts that need to be signed

BE PATIENT AND STUDY EVERY OFFER CAREFULLY

Take the time to negotiate the sale of your business. Study the offers you receive before accepting and provide a counter offer, if needed.

EMPLOYEES

Make sure that your employees hear about the sale of the business from you and not from someone else. Whether you choose to tell them before you sell or after you find a buyer, some of your staff might still decide to seek employment elsewhere. Be aware of this possibility and plan for it to reduce the impact on the sale of your business.

(Source: Canada Business Ontario)

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