5 Things to Consider Before Selling Your Business

5 Things to Consider Before Selling Your Business

Selling your business is often a final step before retirement or moving on to an even more exciting venture; you’ll get some closure with your business, and most likely, a sizable influx of cash. However, selling a business isn’t as cut-and-dry as it appears on the surface. Even if you have a formal offer in place, or you think you have the financial logistics worked out, there are some things you’ll need to consider before taking the next step.

Things to Consider Before Selling Your Business

If you’re a business owner, you’ve probably thought about the possibility of selling your business since you drafted your first business plan. No matter where you are in the sales process — whether it’s a distant dream or an imminent reality — these are the considerations you’ll need to prepare for:

1. Splitting the Business

If you’re the sole proprietor of a business, you won’t need to worry much about how the business is split. If you’re part of a partnership, LLC with multiple owners, or corporation, however, you’ll need to think carefully about how you’re going to split the proceeds of the business’s sale. Thankfully, most partnership arrangements explicitly state the nature of the divide between stakeholders, outlining ownership of each individual in terms of percentages. But what happens if one of your partners doesn’t want to sell? Or what if you only want to sell part of your shares?

2. Capital Gains Tax

The offer you get for your business might look juicy on paper, but before you get carried away thinking about how you’re going to spend or invest it, remember you’ll be paying capital gains tax on whatever money you make in this deal. You can use a capital gains tax calculator to estimate how much you’ll need to pay on this sum to get a more accurate picture of your net income.

3. How to Package the Business

Your business is more than just a collection of assets — though those assets will likely be a part of the transaction too. Figuring out how to package the business to make it ready for outside hands can be tricky to navigate, and you’ll need to have a hypothetical plan (or at least an outline) in place before engaging your prospective buyers in conversation. For example, how and when are you signing over the deed to your main building, and what devices and furniture on the premises constitute company property? How are you going to inform your clients, and how will they be integrated into this new era? If your business is merging with another, this can be exceptionally complicated.

4. How to Transition Yourself and Your Team

Thinking beyond assets, you’ll also need to consider how you and your team are going to transition as your business is sold. Are your employees going to keep their jobs and continue working in the same capacity, under new management? Are you going to be kept on staff as a full-time worker or in an advisory capacity, or will you be leaving the business altogether? Your prospective buyers will likely have more say in this than you will.

5. Post-deal Finances and Lifestyle

If you’re exiting the business completely and planning on retiring, you’ll need to have a plan for your retirement income and finances. What will you be using as your main source of income? How will you protect your capital against market fluctuations? It’s also important to know how you’re going to keep busy; hobbies, recreation, entertainment, and even some forms of work are important to keep you occupied once you’re retired.

Legal and Logistical Hurdles

Obviously, there’s much more that goes into a business purchase or acquisition than these five considerations; these are merely intended to help you make the best decision for yourself and your company. You’ll need to work closely with a lawyer throughout the sale process, negotiating terms and walking you through the deal step by step. It’s an intimidating process for amateurs, but if you make it that far and you’re ready for the business to sell, the end result is more than reward enough for your efforts.

For Sale Sign Photo via Shutterstock

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Larry Alton Larry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.

2 Reactions
  1. All of these are so important when selling ones business and I really enjoyed reading this. Of course having a great lawyer through this process is very important. Thanks for this article.

  2. I had no idea that when you sell your business, you will be paying capital gains tax on the money you make in the deal! Also, I agree that you should make sure you have a plan for yourself and your team and give them a heads up. Also, I like that you talk about working with a professional through the sales process because you will need to negotiate terms and conditions.

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