Selling your business might be one of the most sensitive and involving decisions you will ever make. It sums up all the effort, resources and time you have put into establishing the business to what it currently is. Whatever the reason behind the sale, you need to carefully consider how you are going to carry it out, the procedures involved and the total worth of the whole investment. Here are some of the considerations.
Check with a CPA
You would want to know the real financial position of your business before you place a price tag on it. What is the income it is generating? What are the assets worth and the liabilities? Are there loans that are being serviced and if so, how much? Get to the real expenditure, and balance all accounting books to have a clear picture of how much the business is worth. The CPA will help clarify issues such as what to do with capital gains from selling business.
What is the value of the goodwill? Do you want to include this in the sale? The CPA will advise if you should include the initial amount you parted with as goodwill, increase or decrease the price. A key consideration is the current position of the business. The higher the brand value, the more the goodwill.
You might not know the exact value of all the business property. Be aware of equipment depreciation in value as the years go by. This is also important when you are considering 1031 exchange business. Most of the assets may have a lowered value than the purchase price. Carrying out a valuation exercise will help give the current market value of the equipment and other assets. You will also be able to set a more reasonable price. You can list down all the assets you have, their purchase value and current value. With this, you can go ahead and add other expenditures and sources of income. When you balance the two sides, you will be able to establish the real value of the whole establishment.
Your Priorities Selling Your Business
Why are you selling the business? Is it because you want to start another business, retire or it is no longer working for you? Whatever your reasons are, you need to analyze them carefully. Do you want the new owner to carry on with the business traditions, do you have a set asking pricing or are you willing to sell some of the business assets separately?
If you are thinking of starting another business, maybe you can try out 1031 exchange business. You will manage to dispose some of the current business properties and acquire the ones you require for the new establishment.
Come Up with a Selling Strategy
You will realize that selling the business will be more involving than forming it. When you have factored in everything including the equipment depreciation and capital gains from selling business, you can consult with a financial adviser or someone who has the experience in marketing or disposing of business property.
A professional will help you understand all the legal formalities such as tax rules that will apply, what you should and should not disclose to the buyers and the ethical standards to follow. They will also advise you on the best time to sell the business.
You should also understand that the more stringent your terms are, the further you will be from the expected sale price. Remember the adage’ your price my terms.’ In this case, the more you are willing to accommodate the buyers’ terms, the closer you will be to the asking price.