Thinking about selling your business? Before you do, it is important that you are both prepared and informed. Here are 5 considerations that should help you in the journey of selling your business.
Timing of the sale
It is important to prepare for the sale as early as possible. One or even two years in advance would be preferable. More time means greater opportunity to get all of your affairs in order. You can work on your financial records, your business structure and your customer base. Working on these things can improve the profitability of your business. This will help your business sell for more and will allow for a smoother transitional period between you and the buyer.
Value the business
You need to determine the value of your business. You don’t want to price the business too low or too high. Too high and it won’t sell; too low and you will lose out. It is worth the time and expense to get a professional evaluation. You will get a document detailing the reasons why your business is valued at the value it is given. This will bring credibility to your asking price.
Clean up your financials
Get your financials audited and accurate before presenting them to the buyer. You should have the last three years of financial statements and tax returns available to the buyer. Sort out any issues with SARS or lenders. Better financial records means greater transparency. Greater transparency means that the buyer is more likely to trust you and the business in this process.
Get your legal documents in order
There are a host of legal documents that are involved in the process of selling your business. Here are some of them. Sellers typically want to keep the process confidential from clients, staff and other third parties, to protect all relevant persons and interests. A confidentiality agreement will help here. Your heads of agreement (or heads of terms) is a preliminary document. It will outline many of the terms you will be contracting on, but will not be binding. Then, depending on how you structure the purchase agreement, your main contract will either be an asset purchase agreement or a share purchase agreement.
Get legal advice when selling your business
Every step in preparing for the sale entails careful action. Every term in the final agreement has some consequence. You as the seller have to negotiate these terms so that you are not faced with disastrous consequences. It can be easy to trust someone who is offering to pay a large sum of money for your business. You may expect to be paid upfront, but don’t know that the terms state that the payment is to be deferred. You might not have picked up that the payment is conditional upon the business making profits or other conditions outside your control. Having a lawyer who is skilled in this area can help you navigate through the legal intricacies. A lawyer can help you avoid any major problems along the way.
Looking for a lawyer to help you? We are able to help you in selling your business. Please do not hesitate to contact us at [email protected].