Make a Plan to Sell Your Business

January 2023

Selling a business can be a complex and intimidating process. Still, with the proper planning and preparation, it doesn't have to be. Whether you're looking to retire, move on to a new venture, or take advantage of market conditions, it's crucial to have a clear plan in place to ensure a successful sale.

In this article, we will provide you with the knowledge and resources you need to make a plan to sell your St. Louis business successfully. We will cover key topics such as assessing your business's value, understanding the sale's tax implications, identifying potential buyers, and negotiating the terms of the sale.

We will also discuss the importance of working with the right partners, such as a business broker, accountant, and attorney, to guide you through the process. By taking the time to understand these critical issues and planning ahead, you can increase the chances of a successful sale and maximize the value of your business.

In this article, you'll learn to plan and prepare for a smooth business sale process, tips and strategies to increase the value of your business, and how to navigate the legal and financial aspects of the sale. With the proper knowledge, partnerships, and preparation, selling your St. Louis business can be a breeze.

1) Understand Your Motivation to Sell

First, understand why you are selling and what your motivations are. Evaluating your reasons for wanting to sell and creating a successful plan is essential. Analyze both personal and financial goals associated with selling your business. Reviewing these goals can help you identify which aspects of your sales plan should be prioritized.

2) Importance of Working with the Right Partners

According to the Small Business Administration, about two-thirds of small business owners who sell their companies can find buyers. However, the success rate can vary depending on factors such as the industry and the condition of the business. For example, businesses in the technology or healthcare industries may have a higher success rate than those in retail or manufacturing. Also, profitable companies with a solid track record of growth are more likely to successfully find a buyer.

Working with the right partners can significantly increase the chances of successfully selling a business. A business broker, for example, can help identify potential buyers and handle the negotiation process. An experienced lawyer or accountant can help with the legal and financial aspects of the sale. A good team of advisors can help ensure that the process goes smoothly and that the best deal is reached for the business owner. Overall, it's imperative to have the right team in place when selling a business, as they can significantly increase the chances of a successful outcome.

3) Assessing Your Business Value

Assessing the value of a business is an essential step in determining its potential selling price. Several methods can be used to evaluate a business's worth, depending on the business's specific circumstances.

One popular method is the income approach, which looks at the business's projected future cash flow. This method is often used for companies with a steady income stream and a predictable future. Another method is the market approach, which compares the business's financials and operations to similar recently sold businesses. This method is helpful for companies in a similar industry with similar characteristics.

Another method is the asset approach, which looks at the business's tangible assets, such as property and equipment, and its intangible assets, such as its brand and customer base.

A business appraiser or a business valuation expert is the best professional to assess the value of your business. They will use industry-specific knowledge, comparable sales analysis, and market trends analysis to help determine the accurate value of your business. They can also provide insight and advice on how to increase your business's value before selling. Working with someone with experience in your industry and who can provide an accurate and unbiased assessment of your business's value is essential.

4) Tips to Increase the Value of Your Business

There are several ways to increase the value of your business before selling it.

● One important tip is to focus on increasing revenue and profits. This can be done by expanding your customer base, increasing sales, and reducing costs.
● Another way to increase the value of your business is to improve its operations and efficiency. This can be achieved by streamlining processes, automating tasks, and investing in technology.
● Additionally, investing in your employee's growth and development can also increase your business's value.

Other tips include:

● Building a solid brand
● Diversifying revenue streams
● Implementing effective strategies to make the sale known

It is essential to work with a professional such as a business appraiser or a business valuation expert, to determine the best steps to increase the value of your business before selling it.

5) Navigate Legal and Financial Aspects of the Sale

Navigating a business sale's legal and financial aspects can be complex and time-consuming. It is vital to work with a team of experienced professionals, such as a lawyer and an accountant, to ensure that the process goes smoothly and that the best deal is reached for the business owner.

● A lawyer can help with the sale's legal aspects, such as drafting and reviewing the purchase agreement and handling regulatory compliance requirements.
● An accountant can help with the financial aspects of the sale, such as reviewing financial statements and tax implications.

Additionally, it is crucial to have all the necessary documents, such as financial statements, tax returns, and licenses. It is also essential to be aware of any potential liabilities the business may have and address them before the sale.

6) Understanding Tax Implications

Understanding the tax implications of selling a business is crucial to ensure that the process goes smoothly and that the best deal is reached for the business owner. Consult with a tax professional to understand the tax implications of the sale, including capital gains tax, depreciation recapture, and other taxes that may apply. Additionally, it is essential to understand any tax implications for the buyer, such as the tax basis of the assets being purchased. The professional will also help you set up the proper structure for the transaction, for instance, whether to sell the assets or shares of the company. This will have a significant impact on the taxes incurred. It is essential to consider the tax implications early on in the process to minimize any potential surprises and to ensure that the sale is structured in the most tax-efficient way possible.

7) Identifying Potential Buyers

Identifying potential buyers for your business can be a challenging task, but it is an essential step in the selling process. One effective way to identify potential buyers is to work with a business broker or a merger and acquisition advisor. They can use their industry knowledge and connections to identify potential buyers and match them with your business. Additionally, you can also reach out to industry associations or professional networks to identify potential buyers. Advertising your business for sale on online platforms and business-for-sale websites is also an excellent way to reach a larger audience and attract potential buyers. It is also essential to consider the business's strategic fit for the potential buyers, as well as their financial capability to purchase the company. It's necessary to be patient and persistent and not rush into a deal. This will help to find the right buyer for your business.

8) The Negotiation Process

Negotiating the terms of a business sale is an essential step in the process, and it's crucial to have an experienced professional to help you through this step. A business broker or a lawyer can help you navigate the negotiation process and ensure that the best deal is reached for the business owner. It's essential to have a clear understanding of what you want to achieve from the sale, including the price, payment terms, and any contingencies. Additionally, it is vital to be prepared to compromise and to be open to creative solutions. It's essential to be aware of the terms that will be beneficial for both parties, such as the terms of the non-competition clause, employment agreements, and transfer of intellectual property.

Selling a business is a complex and time-consuming process that requires a well-thought-out plan. It is vital to work with a team of experienced professionals, such as a business broker, lawyer, and accountant, to ensure that the process goes smoothly and that the best deal is reached for the business owner. It's also essential to have a clear understanding of the value of your business, the potential buyers, and the legal and financial implications of the sale. Planning ahead and being prepared can increase the chances of a successful outcome and help you achieve your goals.