Many entrepreneurs decide to move on from their businesses to retire or try something different. Selling a business is a big step, and entrepreneurs must consider it carefully.
The U.S. Chamber of Commerce offers the following factors to consider when selling a business.
- Timing of your business’s sale. Good timing is crucial to the success of the sale. Be sure to research the market; you could miss financial benefits if you sell your business when its valuation is lower rather than waiting for the market to change in your favor. It also is important to know the sale process could take longer than expected; it may be a year or more before you finalize the sale.
- Reason for selling. Your goals, such as retirement, should drive the sale of your business, so determine your reason and how it will affect you going forward. Do not rush the decision or make it impulsively. Your reason also may affect who you want to buy the business; finding the right buyer will take time and energy.
- Your business’s value. You can determine your business’s value by examining profits, inventory, key customers, goodwill and how necessary your business is to its industry. Undervaluing and overvaluing your business can be an issue, so it can help to use an impartial third party to estimate the value correctly. When you are determining the price point, buyers are looking for the business’s current value and not potential growth value.
- Personal readiness. A sale should not proceed unless the owner is completely ready to transfer ownership. Avoid regrets by determining whether you have accomplished your goals with the company or whether you have unfinished business that should postpone your plan to sell.
- Structure of the sale. You can sell your businesses in different ways, most commonly via an asset sale or share sale. For an asset sale, the entrepreneur retains ownership of the company and sells some or all of the company’s assets. A share sale involves selling the entrepreneur’s shares in the company. Each sale structure comes with tax implications that affect how much you make from the deal.
- Your next steps. It can be helpful to know what moving on will look like once your business is sold. After years of running a company, you may feel something significant is missing. You will handle the decision better if you have something to look forward to.
