Are you thinking about selling your business


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Are you thinking about selling your business

  1. 1. Are you thinking about Selling your Business?Posted on December 19, 2011 by Maya PillaiAre you ready to sell your business? If so, there are a few questions you need to ask yourself.What will you do after the sale? Understand it is not what you will do with the money you getfrom the sale but also think about how you would spend your time. There are many businessowners who are depressed once they sell their business. Here are a few pointers which will helpyou decide whether it is time to make an exit gracefully and move on:Not passionate about your business anymore – Once you begin to feel that going to youroffice each day is more of a burden than fun, then it is time to move on. It is a sure sign ofburnout.Not interested in further investment – If you show no inclination to take your business to thenext level, by making capital expenditures, consider it a legitimate reason to sell your business.Lacks the skill set to enhance business growth – There are many small business owners whofeel that they do not have the right skill set to take their business further ahead. If you feel thatyou are falling short of the required skill set, then it’s an ideal time to sell your business.© 2011 Apptivo Inc. All rights reserved.
  2. 2. How to Sell your BusinessOnce you have made the decision to sell your business, there are a number of documents that youneed to put together. This is necessary and very much mandatory because it will not onlysimplify the process but also create an impression on the buyer. Let’s go through the checklist ofwhat you need to do before advertising the sale.Get a professional appraiser – The first and foremost thing that you need to do once you havedecided to sell your business is to do a business evaluation. You should know the worth of yourbusiness. Evaluating your business with the help of an external source will give you an ideaabout the value of your business and also help you gauge the price offered by the buyers.Business evaluations give a detailed report of the market position of your business, financialsituation and also the strength and weakness of the business. Investment banking firms, businessbrokers and local accounting firms are the ones who can help evaluate your business. However,ensure that the firm which performs the evaluation has experience in selling firms similar toyours.Ensure that your books are in order – Once you have decided on your professional appraiser,next thing to do is to get your accountant to prepare the adjusted balance sheet and a “statementof seller’s discretionary income.” The statement of seller’s discretionary income shows thefigures of tax returns of the last three years as well as the depreciation deductions, anycontributions, interest expense, interest income and also any other income/expense that are notpart of your business. Ask your accountant to prepare an adjusted balance sheet that will displaythe assets of your firm to fair market value and it will remove the assets and liabilities such asleased equipment which the buyer does not have to acquire. These documents will help theappraiser give a professional opinion about your firm’s market value.Consult your tax advisor – It is always wise to talk to a tax advisor regarding how to handleyour finances before you pursue your sale. This will help you get an insight into the structure ofyour deal and also the type of personal and corporate tax situation you would be encountering.Get the help of a good brokerage firm – When choosing a business broker, ensure that he iseither a member of the International Business Brokers Association or someone who is a certifiedBusiness Intermediary who is proficient in dealing with small businesses. The primary job of thebroker is to prepare a contract called “offering memorandum.” It contains an in-depth descriptionof your business, the tax returns, the balance sheet and the statement of the discretionary incomeof the seller.Confidentiality agreement – Your business broker will also make an agreement with the buyerbefore you hand over the documents containing the information about your company. This isdone so that the buyer does not leak any sales information which could be detrimental to thecurrent operations.Check the financial credibility of the buyer – Do not assume that the potential buyer has thefinancial ability to buy your firm. Get a background check done on him before you make any© 2011 Apptivo Inc. All rights reserved.
  3. 3. commitments. This can be done through an affluent business attorney. They will carefullyanalyze the financial document signed by the buyer before sending it to you.Last but not the least, once you have signed the deal for the business exit; be precise about eachstep of the sale, starting from signing of the deal through the closing of the deal. Also, ensure tofile the paper work of the sale with the IRS by filling out Form 8594. This should be done jointlyby the seller and buyer.You are welcome to add more points, if you feel anything important has been missed out.© 2011 Apptivo Inc. All rights reserved.