One of the most important steps to selling or purchasing a business is to understand its value, either potential or current. There are several ways to do this, but the top three are: looking at company assets, looking at its earning power, and comparing it to similar businesses.
One generally gets a valuation of a business from specialists that look into the business and determine what it’s worth. From there, the owner can list a price or the buyer can request a price estimation.
However, selling a business isn’t a decision that one should make lightly, especially if they’ve spent years building it up. There are a lot of reasons that selling and walking away might appear to be the best decision, but there is a lot of work that goes into the process. And once it’s done, it can’t be taken back.
Here are a few things that a potential seller needs to keep in mind when they’re looking at selling their business:
Think About The Employees
A business owner needs to think beyond the assets and the monetary value. They might be ready for retirement, wanting to spend time with the kids or with their families, but they need to think about their employees.
Will they be keeping their jobs? Are they going to be shifted to another location or kept where they are? The buyer will have more say, but it is always nice to make sure that the transition is a smooth one for everyone involved.
Is The Payout Worth It?
Instead of selling, could there be alternative ways to go about this? Maybe moving into a more “owner” mindset, and less of a manager one? Selling it all for a large, lump sum payment might be a nice idea, but there could be years of profits yet to be reaped.
Maybe hiring a manager to hold down the fort instead could be a good idea.
Consider The Taxes
Not a lot of people like to think about it, but taxes are involved with nearly all financial transactions. This includes selling a business, even if it’s a private sale. The capital gains tax will be applied to this sale, and that means a seller needs to start making plans on getting assistance to make sure Uncle Sam gets his due.
Don’t rush into selling a business, even after getting a hefty valuation done. There are a lot of considerations that need to be made before then, and who knows? It might be worth holding on to for a few more years yet.