Guide to Selling your Business - Everything you need to Know

The mere thought of selling a business can be daunting. So what do you do if you are looking to do just that?

Did you know that selling a business really isn’t as difficult as it sounds? We will take a look at some reasons why.

How do you go about selling your business?

Businesses shut down every day, while others end up with mergers and acquisitions. Many new businesses go bankrupt rather shortly after they begin. The only certainty is its uncertainty. Over the last two decades, growing competition has put most any business' hold on the market in jeopardy.

If you have ever sold a piece of land or a house, you would know that there are a lot of factors that need to be taken into considerations and weighed before arriving at a decision. Similarly, when we talk of selling a business, the stakes are even higher, because a lot of parties may be involved in the decision-making; existing stocks of products and infrastructure need to be dealt with, and determining the fate of the human capital associated with the business could be a significant concern.

Transferring the ownership of a business through selling is not an overnight decision, but can only happen over a period of careful analysis; legalities take time.

Assess your financial standing

This is the most important step in the whole process. Unless you know what the financial value of your business is, you cannot just take a price and smack it on. No matter what the reason is for selling, presenting a good picture of the organization is important.

Consider a scenario where your business has been substantially growing or has been reasonably stable. You’re only selling it because you are relocating. Here, searching for buyers isn’t much of a challenge, since your company's balance sheet will do the talking for you.

It is the most favorable place to be for a buyer when they know you are established in the market and not much groundwork would be required to gain a customer base. You must be able to negotiate well and come up with a deal that is profitable for both parties.

However, in the event of a loss, a poor growth rate, and dwindling market value, selling immediately might not be the right choice. If an upcoming period of up-scaling is predicted, it is better to improve your financial standing before venturing out for prospective buyers. Your finance and legal team, if any are hiring an external expert in this matter, might help you yield substantial returns, if not any profits.

Alternatively, you may choose to break down the sale of your tangible assets such as machinery and furniture to different suppliers and business rights to another organization to get as much return as possible. Yet again, negotiation plays an important role in reaching an agreeable deal. Timing is key to make a reasonable sale, and thus you must determine when the correct time to pass on the baton is.

Develop and Implement an exit plan

Thorough market analysis also determines the selling ability of the business. You must establish the demand of your business and its credibility. Such will go a long way.

At the same time, finding out the legal requirements of sale and having the right agreement prepared, clearly stating the interests of, not only the decision makers or buyers, but also the employees and other stakeholders who are directly or indirectly involved.

A concise exit plan highlighting the fate of its employees, retention policy, the value of business assets, client information, the transfer for any intellectual property rights, time-frame involved in the transition, handover of the business, and post-sale formalities should serve as common ground between all the affected parties.

Disposal of human resources

Employees are an integral part of any organization. It is important to communicate the ongoing events and the current state of affairs to them. If you are planning to start a new business and would like to retain some of your current employees, it is best to discuss it with your subordinates and seek their opinion.

Alternatively, it is advisable to discuss the future of your employees with the prospective buyer and try to consolidate their position in the existing organization. This could be an attractive offer for the buyer as well, because, who else would better understand the company's operations, customers and challenges than its current employees?

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.