Jason writes for Horenstein Law Group in Vancouver, WA. This article is not intended to be legal advice. Please consult Horenstein Law Group or your own council.
Have you thought about what to ask yourself before selling a business? This is relevant question if you have poured your time, money, and heart into developing a successful business and now you want to turn your investment into equity. Well congratulations, but to guarantee a smooth transition be careful to ask yourself these important questions before going forward.
Be sure that you clearly understand the motivation behind your decision. Whether you are planning to leverage your acquired experience and equity into a new venture or if you just want to have more discretionary time, give form to your reasoning and write it down. This will help you to make sure that your post business sale expectations are met without disappointment or disillusionment.
What is the value of my business?
Your business likely has a value that you ascribe to it, but is that the same value that the market recognizes? In determining the value of your business it is important to rate your business according to a SWOT analysis; strengths, weaknesses, opportunities, and threats. Identify the advantages and disadvantages of your business when compared to competitors. Have you identified specific opportunities among your target market, or perhaps threats to the business’s continued success. These are all questions that a prospective buyer is going to ask before purchasing your business, so it is prudent to have the answers mapped out ahead of time.
Is the timing right?
The age old adage timing is everything is well deserving of consideration when selling any asset including your business. Is the economic climate favorable for a sale? A generic way of answering this question is to judge by the housing market. When housing prices are recovering the market is generally recovering. Aside from the general market conditions, one should also consider the market for the particular type of business one is selling. If you are selling a housing construction business at a time when housing starts are depressed then you might be better served to give the market time to rebound.
How do I find a buyer?
Finding a dependable buyer can be as challenging as determining the market value of your business. Begin by putting the word out to your friends, relatives, and colleagues from work. It’s not a secret that word of mouth is the best form of advertising available. Encourage your first degree of contacts to spread the word to theirs respectively. By starting with a good contact base you will be surprised at how fast you attract interested parties.
Following the aforementioned best practices before selling your business is the best way to ensure a smooth and lucrative transition.