In Show 069 – Selling Your Business originally broadcast on Facebook Live on Wednesday 7 March 2018 we explore this interesting topic.
Download the Workbook here – 069 – Worksheet.
Today we start our month-long focus on Phase 11: Selling your business. This is the phase that the previous ten have been getting you ready for. You can sell part or all of your business or list it on the stock exchange. Over the next few weeks we are going to discuss each of those options in detail. Today we are going to focus on the sale of a part or the whole of your business.
Phase 11 is at the top of the Business Legal Lifecycle for a simple reason. Eventually everyone is going to have to exit the business they’ve started. You may do it by choice or you may be forced to do it but it will happen to you eventually. That’s incredibly important to realize because you need to set your business up to be sold. All too often we meet business owners who have made no preparation for a sale and now have to scramble at the last minute. When that happens you won’t be able to sell your business for anything close to what it’s worth. One of the big reasons we started the BLL was to prevent situations just like this.
When you start your business you need to have an end goal in mind. To that end you need to have a conversation with your accountant and lawyer about how best to structure your business. The process of selling your business will depend on whether you are selling shares in the business or simply want to sell it out right. Your goal is to maximize the sale of your business. To do that you need to follow 11 steps.
- Collate all the information about your business
You want to collect all the information about your business in one place. Transaction histories, history of employees and everything else you can think of needs to be readily accessible.
- Financial information
The buyer doesn’t just want to see the history of your transactions with your suppliers. They want to see the entire financial history of the business. If you haven’t disclosed all your money that you have made from the business in order to avoid paying taxes you are potentially going to cost yourself a lot of money on the final sale of the business. You have to be able to prove that you are making the money you claim to be.
- Interview business brokers
There are plenty of people in this sector and it’s really important you pick the right broker. Don’t be afraid to ask for references.
- Want do you want from the sale?
Before you make a sale you have to decide what your red lines are. What price do you want to get? Are you willing to continue to work after the sale?
- Choose a business broker
Now the time has come to choose a broker. You’ll be expected to sign a contract so don’t be afraid to have a lawyer look it over before you sign.
- Marketing the business sale
There are lots of different ways to do this. You will want to have discussed this with your broker before you added him or her to your team.
- Consider offers
Don’t take the first offer you receive. Take your time to look over multiple offers to be able to weigh which one is best for you.
- Negotiating and accepting the offer
You will likely want to negotiate terms and price so you need to have one person to do that negotiating for you. You don’t want your lawyer, your accountant and your broker all negotiating.
There will likely be a due diligence period before the sale is approved. You will be expected to open up your books and offer all the information that’s required.
This is usually the easiest part. This is where all parties meet and settle the transaction by signing paperwork and handing over the cheque.
- Retention period
There may be a period where you continue to work for the business after the sale to ensure a clean transition.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.