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How To Get The Best Price When Selling A Company

By AZIZAM AZIZAN

Selling a company is the most popular exit strategy for business owners. In some cases, no successor wants to continue the business; In others, it is always the business owner’s plan to turn the business into a liquid asset at a certain point. Whatever the reason you want to sell to you, following these tips for selling a business will help ensure you get the best price and sell your business.

5 TIPS TO SELL A COMPANY

  1. Sell at the right time for the right reasons.

The most common reason to sell a company is that the business owner is sick or too old to pursue it – the worst time to sell. For one thing, it will be very difficult for you to deal with the added stress of selling a business in that situation; for others, the buyer will use your situation as leverage against you.

So don’t wait until then. The right time to sell is when you are still busy and have a successful business for sale.

And what is the right reason? Selling a company is very much like selling a house in some respects. When you sell a house, you are not saying that you want to sell because the house is too small. You say that you want to move closer to work, for example. When selling a business, you want to sell because you want to pursue different opportunities or because you are looking for a different lifestyle (such as retirement).

 

2. Clean up about what you are selling.

Before selling a business, you need to consider all the assets of the business and decide what you are selling. Determine the physical assets you sell and the other assets you sell. Selling a company often includes assets such as goodwill, trademarks or client lists as well as physical assets.

This value depends on their quality.

If your business is incorporated, you will also need to decide whether you will sell your company as an asset sale (where you sell everything in the corporation but not the incorporated company itself) or a stock sale (where you sell everything including entered by the company).

3. Determine what your company is actually worth.

Neatly but honestly, your business is worth as much as it will take on the market. But determining that price is a trick. There are several different business valuation methods from an asset -based approach to a future earnings approach. Of course, no approach can be used in isolation; current markets, economic trends and what similar businesses are selling should also be taken into account.

You definitely have a professional business appraisal. While anyone can do a business appraisal, a business appraisal done by a professional will be considered better by potential buyers and can save you legal hassle later on.

“… several court cases have identified the difference between evidence provided by a qualified business appraiser and that provided by someone without the same level of competence and education” (“How Much Is Your Business Worth?”, Grant Thornton LLP).

In Canada, one place to find professional business appraisers is through the Canadian Institute of Chartered Business Institute website. In the United States, the American Association of Valuers is a good starting point.

4. Keep your house in order.

When you sell your company, you have to be careful not to miss things. In fact, this is a time when making a harder effort to keep things in top form can really pay off. Think again about selling a house; like a home for sale, you want your business to show well.

Therefore, whether you have any interest in running a business or not, you need to ensure that you keep up-to-date business records, inventory and the premises are maintained. People want to buy a thriving business, not a neglected one.

You also want to make sure that you have reduced your liabilities as much as possible, do things like resolve any lawsuits and make sure all tax payments are up to date.

5. Get professional help when selling a company.

Selling a company is a more complex transaction than selling a house – and arguably, one that has more of an emotional impact. In addition to providing the expertise needed to guide you through the sales process, hiring professional help can help you maintain the emotional distance and objectivity you need to successfully sell your business.

Which professional should you hire?

  • As already mentioned, a professional appraiser can determine what your business is worth. The valuation will be more reliable to potential buyers than you.
  • A commercial broker or business broker can be a real advantage in terms of finding and dealing with potential buyers of your business and helping you navigate the sales process.
  • An attorney can create and / or review documents needed to sell your business, such as documents summarizing your business for prospective buyers and purchase and sale agreements.

One Last Tip for Selling a Company

Selling a business is a serious business, so you want to make sure you take the time and trouble to do it right. Careful preparation and use of available professional resources is the key to getting the best possible price when selling your company-and the key to looking at your business realistically and setting a fair price for it.