If you know you want to sell your business rather than pass it on to the next generation, these tips will help you do it right.
As glamorous as selling your business may sound, entrepreneurs who’ve been there will tell you that it’s an incredibly stressful, time-consuming process fraught with dozens of moving parts and truckloads of paperwork. If you don’t hire the right financial, legal, tax, and business advisors to help shepherd the sale through, you’re doing yourself a great disservice.
“The mistakes you could make just getting the tax part wrong could cost you 50 percent of the proceeds of the sale,” says Jack Garson, a business attorney and author of How to Build a Business and Sell It for Millions.
Along with an accountant and an attorney well-versed in business sales and acquisitions, plus a personal wealth manager, you’ll probably want an experienced professional in your corner who can broker the deal -- namely, a business broker or an investment banker.
“If you’re selling the business for $500,000, you’re using a business broker. If you’re selling the business for $50 million, you’re using an investment banker,” Garson says, adding that the cutoff point between the two falls in the $5 million to $10 million range.
Besides helping you set a realistic asking price and assembling the necessary marketing materials to entice, sellers, brokers and investment bankers will discreetly contact potential buyers on your behalf.
“In general, sellers don’t want anybody to know they’re selling the business,” says business broker Sally Anne Hughes, a founding partner of Hughes Klaiber, a New York brokerage firm for midsize businesses. “If a client finds out the business is for sale, they might be concerned. Employees might also be concerned. Vendors might be concerned that they won’t get paid.”
To find a reputable broker or investment banker, get recommendations from your business advisors or entrepreneurs who’ve sold their business, Garson says. Be sure to vet any brokers or investment bankers you’re contemplating working with, as they predominantly work on commission.
“Ask them the average size and price of the businesses they’ve sold,” suggests Vanessa Troyer, co-founder of MailBoxes4Less. “If your company is worth $1 million and most of their sales are $7 million, you’re not going to get much attention. You want to be with somebody who’s selling businesses right around the price of yours.”
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