Business owners decide to sell for reasons as varied as the owners themselves. Some are ready to retire while others are ready to move on to new horizons. Others may find themselves facing a health or family crisis. But whatever the reason, there are a few basics that must be considered when selling a business.
#1 The financial performance of your company is the biggest factor to consider. A business owner who decides to sell after posting several years of growth can expect to command a higher price than one who sells when he’s only been a couple of years into the growth. Nothing is better when selling a business than selling on the strength of growing financials.
#2 The trend of your industry is another important factor. Some industries face downturns that last only a short while others find themselves being relegated to the fringes of industrial society. For example, there are very few roller rinks being opened these days thanks to the changing entertainment habits of US consumers. It goes without saying, if at all possible, delay selling your business until there’s some positive energy associated with your industry.
#3 Also keep an eye on the stock market. When the economy is good, investor confidence is usually high. When investor confidence is high you can usually get a higher price for your business.
#4 Finally, if your business is incorporated, you will have to decide whether to do an asset sale or a stock sale. When you do a stock sale, you sell your shares in the company and the new stockholder steps into the still-running business. In an asset sale you hand over inventory, equipment, trademarks, trade names, patents, etc. There are a host of issues is deciding whether to do a stock or asset sale, so please sure to seek advice from a competent tax professional.
Of course, there are many more factors involved when selling a business, but these three are the first you should consider when thinking selling your business. You can contact us at any time if you have any questions.
Tennessee Valley Group
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