Transferring one’s company is not a decision that can be taken lightly, in an unexpected way. It is important to consider the timing and the necessary preparation before selling your company. 10 questions to help you.
Selling your business in 10 questions
- Is the company ready?
It is estimated that a minimum of 2 years is required before selling your business. Make sure you can produce the tax returns and balance sheets for the last 2 or 3 years. It is necessary to present a good profitability to potential buyers, in order to obtain an interesting selling price.
- Before selling your business, how to evaluate it?
Several methods coexist, depending on current profitability and future forecasts. It can be interesting to create a unique mix of these different methods, in order to establish a selling price as close as possible to reality. Be careful, within the framework of a family transmission, not to charge the company with tax deductions, which could incite a buyer to underestimate its value.
Read also: How to evaluate the value of a company?
- Who in my team is involved in the sale?
As an entrepreneur, it is important to determine which teams and people will accompany you in the transfer process. Think carefully about the different profiles that can help you get the best price. Surround yourself with outside consultants who will bring their expertise to the negotiations and the drafting of the various legal documents.
- Is this the right time?
Many people wait until the company is in decline before selling it. This is obviously the opposite of what should be done. The ideal is to sell a company at the peak of its profitability.
- What is the state of the market?
Before selling your business, it is necessary to examine the market conditions. Depending on your industry, they can influence the selling price. A few years ago, home staging companies were selling very well. Today, some have lost up to ¾ of their value!
- Can the company cope with the changing horizon?
Rapidly changing technology, increasing globalization and other business trends can make the sustainability of a business difficult. The entrepreneur must always stay on top of the trends or be accompanied to stay on top. And if you feel you can no longer keep up with the market, selling your company may be the right option.
- Can the company prosper after the departure of its manager?
Or is it too dependent on a single customer? Either way, it can be a turn-off for a prospective buyer. A “healthy” business should operate when the owner is on vacation. It has a good diversification of revenues, where no single client represents more than 5% of the company’s resources.
- What about after the transfer?
Sometimes, certain agreements are concluded on the condition that the manager remains in the company after the transfer, as a consultant. While it is up to the seller to decide whether this is really worthwhile, for the buyer it is an additional guarantee. And this can influence the final selling price.
- What are the risks of rupture?
Unresolved issues can backfire on the sale, especially in areas that involve assets, accounting and intellectual property rights. Therefore, before selling one’s business, all outstanding disputes should be resolved.
- What are the alternatives to selling?
If a direct sale isn’t right for you, a transfer consultant or banker can help you evaluate other options. How about structuring an agreement to pass ownership to employees? Would you consider selling a percentage of the company to a private equity fund? Or would you do a leveraged recapitalization?
Read also: 8 criteria before selling your sole proprietorship
To assist you in the transfer of your business, call on Actoria, a team specialized in company transfers.
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