What to know before selling a small business

Are you thinking about selling your business? If retirement is on your horizon, you're not alone. At one time, many small business owners are considering their business’s end game, and embark on the next chapter of their lives. But how do you ensure that you get the best price for your business? In this blog post, we'll explore some key tips and strategies to help you maximize your profit when selling your business.

Start to Run Your Business Like You are Preparing to Sell It 

Selling a business is not a decision to be taken lightly. It requires careful planning and preparation. Here are some steps you should consider: 

Maximize Your Profit  

When you initiate the selling process, it's essential to prioritize profit over taxes. Avoid owner discretionary expenses that negatively impact your business's perceived value. Focus on reducing non-essential expenses and showing as much profit as possible. 

Present Your Business Professionally 

Just like good curb appeal increases a house’s value, the same goes for your business. Prepare professional financial statements that showcase your business's performance accurately. If nothing else, this delivers a positive image to potential buyers and instills confidence in the value they'll receive if they buy. 

Key Considerations Before Selling 

As you prepare to sell your business, there are a few key considerations you should keep in mind: 

Employee Agreements 

If you have key employees without employment agreements, it's crucial to address this issue. Potential buyers may be concerned about losing essential personnel and the impact it could have on the business's stability. By securing employment agreements, you provide buyers with a sense of security and comfort. Do this after consulting a labor lawyer (not just any lawyer). 

Address Potential Liabilities

Potential liabilities or lawsuits can be deal-breakers when it comes to selling a business. Take the time to resolve lingering legal issues, Google reviews, vendor disputes, and customer complaints. Doing so will reduce doubts or concerns in the mind of potential buyers. 

State Tax Obligations  

State tax obligations are often overlooked but can have significant consequences. If your business sells to customers in states other than your home state, you should understand the potential implications of that. This is a hot and growing problem. Ensure that your state tax liabilities and filings are up to date. Buyers will scrutinize any outstanding tax issues, and such liabilities can create doubts, leading to a lower purchase price, or the buyer walking. 

The Importance of Working with Professionals 

Selling a business can be a complex process, especially if you've never done it before. Here's why it's crucial to work with professionals: 

Hire a Business Broker

Have you ever sold your business before? If your answer is no, then consider if you want a rookie to handle the sale of your largest retirement asset. We advise you to hire someone to help you sell your business. This is usually a business broker, but it can also be your accountant. A business broker specializes in the marketing and sale of your business. Your accountant has helped numerous business owners sell their business, although that is not his or her specialty. Our experience is that the fees you pay to a professional are much less than the price increase. 

Consult an Attorney  

Selling your business will involve contracts (that is plural). While you don’t want an attorney to create barriers to the sale with 80-page contracts that no one can understand, it is important that you do consult with an attorney early in the process and control the narrative (like how complex and nitpicky the contract will be). But a good attorney will provide valuable advice and ensure that all legal requirements are met throughout the selling process. 

Conclusion 

Selling your small business can be a daunting task and most business owners will only do it once. Because of this, you want to do it right. If you are considering selling your small business, see if Kaizen CPAs + Advisors is a good fit to help you make this transition. Click on the ‘Let’s Chat’ button and schedule a meeting.