Things to Consider When Selling a Business: Pre, During & Post Sale Tips

It’s easy to get lost in the excitement of selling your business.

Most sellers fixate directly on their desired price while forgetting to consider related factors like preparing sufficiently for sale and complying with the taxes after selling the business.

Our article explores all the things to consider when selling a business at each stage: before, during, and after the sale.

Read on and make your transition easier.

TL; DR—Things to Consider When Selling a Business

If you’re in a hurry, here’s a quick overview of what to consider when selling your business online.

We will discuss each factor further in the following sections:

Your company’s value
The right professionals
Your financial records
Timing of the sale
MaintainingBusiness performance
The fit of potential buyers
Confidentiality and non-disclosure
Terms of the deal and fine print
The transition period
Legal considerations
Handover assets and obligations
Capital gains tax on profits
Transition of your employees
Financial planning

If you are thinking about the ultimate exit of your business, Exitwise can help. We’ll assist you in finding specialized M&A experts, such as investment bankers and corporate attorneys, to ensure the business sales process runs smoothly.

Consult with us today and get the best M&A professionals to exit your business at the most appropriate price and terms.

Pre-Sale Considerations to Sell a Business

First, lay the groundwork for smoother negotiations, seamless transition, and a stress-free process.

Here are the key considerations for preparing to sell your business:

1. Your Company’s Value

Before you start the sales process, consider your business's present value to set the target number. If the valuation is lower, you can develop strategies to reach your target, including expanding your product lines.

2. The Right Professionals

Professionals should be involved early during the pre-sale planning. They can help you with your taxes, market your company, and perform due diligence on potential buyers.

That’s where Exitwise comes in. We’ll connect you with top professionals like accountants, M&A attorneys, and wealth advisors. With us, you can get more clarity about every step of the sales process.

Discover how our process works!

3. Your Financial Records

Determine how to gather your accounting records for the past three to five years.

Your buyers will need the financial statements, including the balance sheet, profit and loss (P&L), and cash flow statements, for due diligence.

4. Timing of the Sale

The time you sell your business can impact the final sale prices.

Research the market conditions, check the potential for an increase in tax rates, and consider listing your business when the demand for your products is high.

5. Maintaining Business Performance

Buyers must feel confident that the business will run efficiently after the sale. That’s why you must consider how you’ll maintain the overall business performance throughout the sale process and avoid getting distracted.

You must sustain profitability, nurture existing customers, and expand the customer base.

Factors to Consider During the Sale of Your Business

Amidst the excitement of an offer, it’s essential to consider these key factors:

1. The Fit of Potential Buyers

Compare multiple interested businesses and consider their reputation and vision for your business. Consider their bid price, intent to purchase, and financial capacity.

Consult an M&A advisor to help you pre-qualify buyers.

2. Confidentiality and Non-disclosure

You must consider maintaining strict confidentiality during the sales process. Sensitive company information, such as financial statements, should be protected with non-disclosure agreements (NDAs).

Potential buyers cannot misuse or disclose information during due diligence and negotiation.

3. Terms of the Deal and Fine Print

The selling process requires you to thoroughly review the fine print to avoid missing out on special clauses.

You should be comfortable with the conditions and consider if you’re willing to meet the buyer’s requirements, such as staying on for years after the sale.

4. The Transition Period

Consider how much you’ll stay involved in the business after the deal. You should find the right balance between staying connected to your business and stepping away.

You can continue leading the company, get the transition role, or step away completely.

5. Legal Considerations

When selling a business, you must review the contracts carefully to uncover any risks with the acquiring company or the deal and ensure you don’t get into legal issues.

You can hire M&A professionals to review the documents, and you won’t have to worry about reviewing sales agreements and contracts.

Post-Sale Considerations After Selling a Business

Once the sale is final, you must consider the transition process, from the financial implications to personal considerations.

Let’s explore what to keep in mind:

1. Handover Assets and Obligations

Part of the after-sale process involves defining the responsibilities and assigning them to the new management team.

This step also includes transferring ownership of all intellectual property, physical assets, and customer accounts to the new owner.

2. Capital Gains Tax on Profits

Depending on the sale structure and tax regulations, selling your business may result in tax obligations. For example, you might pay capital gain tax on profit from selling company shares.

At Exitwise, we can help you hire tax professionals to assist you in navigating the tax implications and leverage tax deductions.

3. Transition of Your Employees

Consider how to tell your employees and customers about the business sale.

Wait until the deal is finalized to talk to your employees and customers about the exit to avoid jeopardizing the sales process.

4. Financial Planning

Another post-sale consideration is planning what you’ll do with the lump sum cash you receive.

Strategize how you’ll invest in the proceeds and align your new objectives with your business legacy. Part of the money could be to pay off the debt the buyers didn’t take on or invest in emerging startups.

Mistakes to Avoid When Selling Your Business

Below, we’ve tackled the common pitfalls and dealbreakers that could happen in the business sales process, giving you a competitive advantage.

Undertaking the Sale Process Alone: Going through the laborious sale process without experts is a mistake. You might not get the best outcome or buyer for your business.
Breach of Confidentiality: Whether through negligence or otherwise, failing to maintain confidentiality can result in information leaks to competitors and raise alarm among buyers.
Not Having a Valuation: Selling your business and negotiating with potential buyers without knowing its worth can be a big mistake. Your asking price might outweigh its value, deterring potential buyers, or you may sell at a far lower cost.
Hastily Rushing the Sale: When you rush the sale, you might lose the opportunity to negotiate and find the best buyer. Your buyer can also tell you are rushing and demand more concessions.
Not Pre-qualifying Buyers: Sensitive company information and financial details can fall into the wrong hands of non-serious buyers incapable of making a purchase.
Lack of a Buyer's Perspective: Most sellers fail to put themselves in the buyers' shoes. So, compile a list of questions to ask potential buyers of your business to understand what matters to the buyers.

Frequently Asked Questions (FAQs)

Have additional questions?

Check out answers to the commonly asked questions about selling your business online:

How Long Does It Typically Take to Sell a Business?

On average, a business sale process takes a month and a year. However, the exact time it would take depends on:

The Market and the Location: When you’re selling in a market with lots of selling and buying activity, you might find qualified buyers quickly and sell your business faster.
Price of Your Business: Higher-priced companies can take longer to sell due to the extended valuation process and prolonged negotiation period.
Type of Buyer: Experienced buyers will close deals more quickly than new buyers.
Type of Business: Technology and healthcare businesses may sell more quickly because they align with emerging trends like AI, while others, like retail stores with outdated tech, might take longer.

Should I Sell My Business on My Own or Hire a Broker?

When you sell your company independently, you won’t have to pay commissions or broker fees. However, you might lack the expertise, have limited connections, and get a lower sales price.

Hiring a broker, on the other hand, can expedite the sales process and help you make informed decisions. However, they come at a cost and take some control over the sales process.

Instead, you can consider hiring M&A professionals by partnering with Exitwise. Our team will help you review (and hire) top professionals like tax accountants and attorneys. We will also guide you through the selling process and negotiate your M&A experts' fees.

How Do I Determine the Right Price for My Business?

Here’s an overview of the top 3 steps you should take to evaluate the worth of your business:

Assemble all your financial statements from the previous years, like the P&L statements.
Estimate the value of the intangible assets.
Review listings of other companies in your location and market area.

If you want a simpler, straightforward method for accurate company valuations, use our Exitwise business valuation calculator.

Can I Sell My Business if it’s in Debt?

Yes, you can sell your business with outstanding debt.

However, it affects the selling price and negotiations with potential buyers. Here are the options you can choose from:

Sell and transfer the liabilities and assets to the buyer
Prioritize debt repayment before the sale
Negotiate some debts to remain your responsibility after the sale.

Conclusion

When you’re considering selling a business, all stages are equally important. A well-executed pre-sale plan is the first step to a successful business sale. You should also structure the sale properly and plan for life post-sale.

Thinking about selling your company?

Stack the odds in your favor by avoiding mistakes like undertaking the sales process alone. Exitwise can help you find and hire top professionals to assist you in business sales, saving you headaches. We’ll also negotiate the best expert fees to maximize the profits from the business sales.