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Your Legal Checklist for Selling a Business

— April 28, 2021

Selling a business is different than selling something like a car, where you hand the keys to the buyer and go on your way. Many buyers want you to stay on and train them for a couple of months before you leave.

Deciding to sell your business can conjure up a lot of emotions. It’s tough to part ways with a company that you’ve worked hard to build from the ground up. However, due to various circumstances in your life, you’ve decided that it’s time to pass it on.

But without the right sales techniques, buyers might not see your business the way you do. Follow this checklist to make sure you sell your business at the right price to the right buyer.

Prepare answers to tough questions.

One of the first things that every buyer will ask is: why are you selling your business?

What you don’t want to say is that it’s becoming less profitable or has lost key employees. Think of something that’s more like the following: I don’t have the time to run this business anymore, I want to start a family, or I’m ready to retire.

Outlining your intentions in a clear document can make your goals clear to the buyer. It can filter out those who are just looking for a quick way to make a profit.

Receive a business evaluation from a third-party.

One of the most contentious points of any business sale is the asking price. It’s an age-old dilemma: the seller wants more, but the buyer wants to pay less. How do you arrive at a fair price that both parties can agree upon?

To navigate these complicated procedures, find a business broker. A broker will know how to weigh each factor that affects the value of your business. Since they aren’t involved with either side, a broker can provide a price that’s fair to the seller and the buyer. The process will go a lot more smoothly when you aren’t held up by extensive price negotiations.

Gather relevant documents.

Your buyer will want to know a lot about the history of your business. What sorts of recurring costs should they expect? How much does it make in annual sales? What’s the forecasted growth of the company and the industry as a whole? 

Organize these numbers as concisely and clearly as possible. Doing so makes it easy for the buyer to get a clear idea of what your business offers. Show them why buying your business will be a smart investment for them.

A financial advisor can be a great help during this stage. They can assist you with organizing the information in a conducive way. If there are any errors or oversights in your documents, they’ll alert you immediately, which can prevent problems down the line. In addition, a financial advisor can help you navigate taxes post-sale.

Secure pre-financing.

You don’t want to go through the entire sales pitch, several meetings, and many phone calls just for financing to fall through at the last moment. Make sure your buyer is able to purchase your business before investing a lot of time negotiating with them.

Once you’ve finalized an asking price, find out how much money a lender will give a buyer. You’ll need to take the time to prepare all your financial documents for this step, but it’s worth your while—it can improve the odds of a successful sale.

Maintain confidentiality. 

If you advertise that your business is for sale with your name and logo front-and-center, your competitors will take notice. It may also discourage your employees and affect the overall morale of the workplace. Not to mention, this information can travel to your customers. Will they continue to use your services if they know your company is for sale?

Even though there are many websites where you can advertise your business, it’s not advisable to do this on your own. If the ad is worded too specifically, you risk revealing your identity—if it’s too vague, it won’t drum up interest. 

Get help with due diligence & negotiations.

When it comes to the piles of paperwork that you’ll be dealing with, you’ll need an expert on your side; a lawyer will review each document with an eye for detail.

Man signing contract; image by Cytonn Photography, via
Man signing contract; image by Cytonn Photography, via

You might have heard about the due diligence process. On the seller side, it helps you find a buyer who’s qualified and a good fit for the business. Along with that, you’ll need to gear up for the negotiation process. This can last anywhere from a few weeks to a couple of months.

Hiring a lawyer can help you avoid costly legal fees if any terms are overlooked or misrepresented.

Be mindful of things to focus on when hiring a lawyer. You’re looking for one with experience selling businesses, familiarity with your industry, and strong communication skills. 

Plan an exit strategy.

Selling a business is different than selling something like a car, where you hand the keys to the buyer and go on your way. Many buyers want you to stay on and train them for a couple of months before you leave. You’ll need to help them learn the ins-and-outs of the business, along with transitioning customers and notifying employees. 

After reading this checklist, you might feel overwhelmed by all the aspects involved in selling a business. But with professional help on your side (including business brokers, lawyers, and financial advisors), you can secure a sale that’s right for you.

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