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Last Updated on: August 20, 2020 by Joseph Muriithi
If you have gotten to this point, you already have made up your mind about selling your business. There are not many commitments at this point; you are just familiarizing yourself with the procedures and how to successfully sell your business. During this time it is common some questions to go unanswered. This article will answer some of those questions and familiarize you with the procedures of a sale transaction.
The first question to consider is: do you really want to sell? Before anything else, you should have concretely made a decision to sell your business. The reason for selling a business comes after so much consideration and is preceded by various events. Nobody wants to be in a sale transaction where the seller keeps changing their mind and/or they are not sure whether they want to sell. A good and concrete decision to sell will create measurable expectations and the chances to sell will increase since you already have a determination to do so.
The second questions of consideration: what is the value and worth of my business? After making the decision to sell your business, it becomes a product and thus it requires a price tag. The value and worth of your business is not determined by what you think or what others tell you, the value of a business is determined by the marketplace dynamics and realistic measures. If you cannot figure it out, it is essential you consult with an intermediary or business Planner to conduct a professional valuation of your business. Business brokers are equipped with the right marketplace information and will accurately develop a valuation that will attract buyers.
Now that you are ready to sell and have the value of your business, it is important to ask yourself whether you have everything else ready. Before placing the business up for sale you should first gather some information about the business. Here is a checklist of the information you should put together.
- Three years’ profit and loss statements
- Tax records for the business
- List of fixtures, equipment, and machinery
- Amount and schedules of loans against the business
- Leases and agreements related to the business
- Inventory at hand
- Applicable real estate (business related)
- A simple information guide of what is it that your business does.
Financial records of a business paint the finest expression of the health and well-being of a business. You should make sure that the financial statements are current and accurate. The records should illuminate with a first impression the performance of the business. Seeking professional help from intermediaries will offer guidance to properly present financial records that are thorough and can be easily understood. From an expert’s point of view, the value of a business can be well illuminated by not only the cash-flow but also the profit of the business, owner’s salary and benefits, depreciation and other non-cash valuables of the company.
During the transaction, what a buyer wants to know is whether they can fork out the asking or negotiated price and be in a position to make a living from it. Let’s face it, if your financial records cannot indicate that the business has been supporting itself and making a living for you, it probably cannot be sold. In the long run, various aspects require professional help from intermediaries and business brokers. You do not want to be at the closing of a sale transaction and discover for instance; the tax implications of the sale are going to net you less than you had anticipated.
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