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Follow Several Steps Before Selling Business



Question: How can I maximize the amount of cash I receive when I sell my business?

Answer:

Acquire every last after-tax dollar and get paid in cash. Also, follow three critical steps before proceeding:

– Preplan the sale of your business. This should not be a spur of the moment decision. Rather, it should be well planned.

Though it is not possible to control external factors, such as interest rates and strength of the economy, it is possible to plan for an orderly transition.

Start thinking about some obvious sources for a potential buyer. Should an employee be groomed for possible succession? Might a good customer be interested in acquiring your business in the event of its sale?

– Recognize the importance of finding the right buyer. Most businesses don’t have a set value, but a range instead.

This means different buyers will have different perceptions of the business’s value.

It is important to preplan your confidential marketing effort to gain exposure to multiple buyers, especially synergistic buyers.

Synergistic buyers are individuals who, because of their location, complementary customer base, financial resources or market position, can profit from owning your business. They are willing to pay more.

– Consider getting professional help. Unless you have a background in taxes, legal issues, and mergers and acquisitions, you will probably unknowingly make costly mistakes by trying to sell the business yourself.

Those mistakes may cost you substantially more than fees paid for professional assistance.

Do some homework on various alternatives. Become informed by attending seminars on tax issues, estate planning, and so on.

Ask your CPA or lawyer to recommend “general knowledge” seminars that might assist your learning curve.

The value of your business probably represents a significant percentage of your total net worth. If you wish to adequately fund the retirement lifestyle you have earned, educate yourself about the right way to sell.


Written by Steve FitzGerald, a principal of Acquisition Services Group, a San Diego-based firm that helps owners of privately owned manufacturing, distribution and service businesses sell their companies.

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