It's best not to try to sell right before your major leases or other key contracts expire. When prospective purchasers look at your business, they'll want to be able to predict what they'll need to spend for rent, labor, materials, supplies, and all the other major items. They won't want to have to renegotiate key contracts right off the bat, or take the chance that a lease may not be renewable at all. If you must sell right before a contract is scheduled to expire, we suggest that you try to renegotiate it early, so that you'll get a favorable rate (or at least a predictable one) locked in for your purchaser. At the same time, have your lawyer make sure that the contract will be assumable by a new owner, or you'll have gone to a lot of trouble for nothing.
Even if you've been a determined do-it-yourselfer from day one, selling your business is not a job you should attempt to do alone. Even for a relatively small business, there's a myriad of federal, state, and local regulations and tax issues to consider, not to mention one or more extremely important contracts to negotiate. Selling your business is something you'll probably do only once — there's no opportunity to take a trial run or build up any experience before you do the real thing. Another consideration is that the process of selling can take a lot of time. The more involved you get with it, the less time you'll have to spend actually running the business, at the very time when you need your business to run most successfully. You'll be much better off leaving some of the work to experts who've crafted dozens of deals, instead of spending a lot of your time trying to reinvent the wheel. There are a number of team positions that you must fill, although it's possible that the same individual or firm may fill more than one of these:
Not all of these positions need to be filled for every small-business sale — much depends on the size and nature of your company. However, at a minimum, you'll need to involve your lawyer and accountant. Even a small sole proprietorship will need a lawyer to look over the sales contract if this document is not worded correctly you may not only fail to get all your money, but you can also be exposed to potentially huge liability claims by the purchaser, creditors, customers, employees, etc. The sale will have tax consequences that must be sorted out, and state laws typically require certain papers to be filed whenever a business sells all or most of its assets. If a partner or a corporation is involved, the complexity of the deal will quickly mushroom.
The subject of ethics in business is one that gets little attention in the press — at least, until someone goes to jail for insider trading, or is investigated for price-fixing discussions with competitors. However, we think that you should pay attention to it, especially when it comes time to sell your business. Aside from the moral implications, you need to recognize that selling a business is a high-stakes transaction, especially for your buyer. Your potential exposure to a lawsuit can be huge, if the buyer spends a lot of money and foregoes other opportunities to buy a business that is not what it appears to be, or if you have partners or shareholders who feel they are not getting what they deserve out of the deal. For that reason it's important to observe the letter of the law regarding the following: Disclosure to potential buyers duties to any partners, co-owners, and shareholders In general, it's always important to conduct yourself in an ethical manner, and make it clear to everyone around you that you have a policy of always doing so. If something goes wrong and you do get sued, being able to prove that you had "clean hands" can go a long way in reducing your liability.
Once you've a buyer for your company and come to an agreement as to the major terms and price, you are ready to move into the process of actually closing the deal.
The letter of intent: the buyer outlines the terms and price you've informally agreed to in a written, nonbinding letter, and promises confidentiality so that you'll allow it to investigate your company further. Due diligence: the parties have a limited time period in which to investigate each other thoroughly, to see whether they will proceed with the deal. Purchase agreement: if due diligence turns up no nasty surprises, the parties' respective lawyers will hash out the details of the purchase agreement, any mortgages or financing between the parties, and any supplementary contracts such as non-compete or consulting contracts. State law requirements: state laws commonly require that the selling company's creditors be notified about the pending sale, so they can move to protect their interests. States may also require that corporate stockholders of the buyer and/or the seller vote on the transaction, that minority interests be cashed out, that the parties obtain tax certificates, transfer or buy business licenses, pay sales or transfer taxes, etc. Closing the deal: when all the details have been agreed upon, the parties will sign the contracts that transfer ownership, promissory notes, security interests, etc., as well as any documents required by third-party lenders; you get the down payment, the buyer gets possession of the business, and the transaction will be complete Have a question that wasn't covered here?
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