5 Helpful Tips for Selling your Business

At some point, most business owners reach the point when it is time to move on from the company they have built. For some, it is a career change, move out of the area or both. Others want to fund their retirement. Whatever the reason, if you are thinking about exiting your business in the near future, there are certain steps you should take to ensure a smooth transaction and that you receive optimal value for your life’s work.

Plan Early: If you are thinking of selling your business within the next 12-36 months, the time to start planning is now. It may take a number of months to put all your ducks in a row and make your business attractive for the ideal buyer. Do not leave this important planning until the last minute. Start taking steps right away, even if you need to fly “under the radar” so as to not alert employees or customers of your plans.

Reduce Business Debt: Prospective buyers never want to take on a large amount of debt. And while it may be necessary in some industries to make technological upgrades rather than focus on reducing debt, for the most part it is better to make debt reduction the top priority. The main reason is that the lower the debt the business has, the higher a profit you can show, and this of course will play a major role in the overall business valuation.

Grow/Diversify your Customer Base: On the other end of the spectrum, it is always a good idea to look for ways to expand your current clientele or customer base or even diversify your operations by adding complimentary products or services. Speak with your management and brainstorm ways to bring in more customers and more revenue to the business in a way that makes sense for your current operations.

Consider the Tax Consequences of the Sale: Most business owners prefer to receive one lump sum when they sell, but this may not be the best move for tax purposes. Receiving a large amount of cash at once can throw you into a higher tax bracket and increase your liability. If it works for you, consider receiving installments over time. This may not only be a tax benefit, but it could also widen the universe of qualified buyers thus raising the value of the business.

Work with a Business Broker: Selling your business is probably the most important financial transaction you will make. Since there are many issues that will need addressing during the process, it is highly beneficial to work with a local business intermediary that has handled numerous sales like yours in the past.

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