Selling a business is a complex undertaking that often comes with unforeseen obstacles, so it’s critical to plan ahead. Having a checklist will ensure you handle everything from obtaining legal advice to calculating taxes correctly when finalizing the sale. Get ready for an exciting journey as we uncover what should be included in your checklist for selling a business!
11 Things That Should Be on Your Checklist for Selling a Business
1. Initial Business Valuation
Before you begin the process of selling a business, it’s smart to get an initial valuation on the business. But who should do the assessment, and what benefits come with having this ballpark figure? A professional in the field of business valuation should perform the assessment, such as an appraiser or a CPA specializing in mergers and acquisitions.
Having this estimated value helps set realistic expectations of what may be obtained through negotiations. An honest evaluation also provides a target price that will minimize overvaluing and undervaluing assets.
2. A Trusted Business Broker
Bringing a trusted business broker onto your checklist for selling a business is indispensable in ensuring you get the best possible results. Here are five reasons why a business broker should be at the top of your list:
- They understand what an attractive purchase looks like to a prospective buyer.
- They have large networks of buyers and know how and where to find them, likely yielding a quicker sale process.
- They can help manage negotiations between both parties in order to get the optimal outcome for the seller.
- They have experience understanding market trends and can, therefore, set realistic expectations.
3. A Legal Expert
A legal expert, such as an attorney, will review all documents related to the sale, making sure that your interests are fully protected in it. Also, a legal expert can advise you on how to manage company assets and liabilities before and during the sale. An attorney will also handle any disputes that may arise post-sale.
4. An Accountant
An accountant can provide invaluable insight into the financial aspects of selling a business and the tax implications involved. An experienced accountant will also be able to assist you with your paperwork and provide timely advice on how best to pay taxes from the proceeds of the sale.
This will ensure you stay compliant with federal and state laws. And once you have completed the sale, an accountant can provide ongoing post-sale support to help ensure everything is in working order.
5. Financial Statements
A profit and loss statement should be the starting point for this process, taking into account any potential add-backs when calculating the company’s profitability. Next, take into consideration inventory values, cost of goods sold, software costs, accounts receivable, and lines of credit. Lastly, consider the pros and cons of the accounting method being used and any agency retainers that may need to be paid or assets returned.
6. Legal Documents
Ensure that all crucial employee contracts are in writing, detailing the employment arrangements and any non-compete clauses. Furthermore, it is beneficial to have an attorney assess existing contracts with customers or suppliers and draft up new agreements for future collaborations. Intellectual property protections for trademarks, copyrights, or trade secrets should not be overlooked, either.
Then there’s the asset purchase agreement that details exactly which assets will be included in the sale. Lastly, both parties involved should sign a confidentiality agreement that sets boundaries for trade secrets and other proprietary information associated with your brand. A confidentiality agreement is usually mandatory among certain businesses to maintain a competitive advantage.
7. Business Documents
Several critical documents should make it onto your checklist for selling a business, the first of which is an operator manual. This document should include a comprehensive overview of how the business operates, including essential organizational charts, policies, and procedures.
With such documents in place, potential buyers will be presented with a significantly clearer picture of what they’re buying into, and this could be the decisive factor in getting your offer accepted.
8. A Brand Overview
By taking into account your brand’s unique selling points, traffic breakdown, and assets, you can set yourself up for success when selling a business. Unique selling points could include the strengths and growth opportunities of your brand versus its competitors.
A detailed breakdown of overall customer acquisition costs (CACs), traffic analytics, and strategies behind each traffic channel is an essential piece of key information. Don’t forget the brand assets like email lists, social media accounts, and even brand mentions that exist outside of the direct channels.
9. Buyer Qualification Criteria
To start, you’ll need to understand whom you are targeting as potential buyers. This can include financial investors, strategic buyers, or entrepreneurs looking for new opportunities.
Once you have a bearing in mind who your ideal buyer might be, it’s essential to begin preparing questions to ask upfront so that you can quickly weed out any tire kickers. Doing so will help you move down the path with buyers that have serious intent about purchasing.
Questions that you can ask potential buyers include:
- Are you familiar with our company and our products/services offering?
- What is your business experience, and what industries are you familiar with?
- Why are you interested in buying a business, and what are your long-term goals for the company?
- Do you have any other businesses or investments, and how would this acquisition affect them financially?
- How much money are you willing to pay for my business, and why do you think it is a fair price?
- What is your timeline?
10. Marketing Material
All too often, when creating a checklist for selling a business, marketing is one of those details that get ignored. However, marketing should be a critical part of the planning process to guarantee a good sale. Consider which channels you will use for marketing your business; this is not just limited to print and online ads but also networking opportunities and personal connections.
Furthermore, you must maintain confidentiality throughout to protect the interest of your business (and yourself). Be sure to work with your broker and other advisors to craft strong marketing materials that carry the voice and vision of your brand. After all, who knows your business better than you?
11. Closing Documents
Depending on the complexity of the sale, closing documents can vary from the short and simple bill of sale to legal contracts and disclosure statements with terms that must be agreed to. Navigating all these documents requires a legal advisor and accountant with expertise in the complexities of selling a business.
The accountant should focus on minimizing the tax impact of the sale, while your legal advisor’s role is to create legally binding documents that cement any promises made between both parties.
If you are considering the sale of your business, the knowledgeable team at ASA Ventures Group should be at the top of your list for mergers and acquisition consulting services. We offer turn-key strategies that include negotiation strategy, financial advice, marketing to potential buyers, and deal closure guidance. Call ASA Ventures Group today and realize the peace of mind that comes with knowing that someone reliable is standing by your side throughout the entire process.
