Selling your business? – Do this first

Do your plans for the future include selling your small business? For the best chance of a successful outcome, you’d be smart to start preparing for the sale well in advance.

For What It’s Worth

After you’ve built your business from the ground up, being objective about its value can be difficult. If you know what other companies like yours have sold for recently, that may give you a rough idea of what price your business might bring. For a clearer idea, consider having a professional business valuation done.

Give some thought, in a broad sense, to the type of buyer who would be ideal. Perhaps a key person who currently works for your company? A competitor? Someone who just wants to buy a good business and run it but isn’t a current employee or competitor? An investor who wants to make a profit but isn’t interested in the day-to-day operations of the company? The sales price you can realistically expect to receive will depend in part on the type of buyer you are targeting.

At this point, you’ll also want to think about your future participation in the business after it is sold. Consider the role you’d be willing and able to play, if any, during the transition to new ownership.

Make It Attractive

Before putting your company on the market, you’ll want to focus on its profitability. Taking steps to enhance the bottom line — even if it means paying more income taxes — may allow you to command a higher price for the business.

On the asset side, now is the time to identify any equipment, furniture, fixtures, or machinery that is no longer useful and consider selling or otherwise disposing of these items. That way, you’ll be able to present a leaner business to potential buyers.

It’s What You Keep

Selling your company for a fair price is important, but so is securing all available tax advantages. Will you be structuring the sale as an asset sale or will you be selling your company stock? Each has different tax implications. With smart planning, you’ll be in a better position not only to command top dollar for your company, but also to minimize taxes on the sale.