Buying or selling a business is a significant financial transaction.
Endeavoring to sell one’s business requires experience, time
and a professional’s assistance. Here are some words of advice:
Prepare Before You Attempt To Sell Your Franchise Business
You
should have your last 3 years of tax returns and financial statements
readily available and it is advisable that you put together the
last 3 years of monthly bank statements too. Some buyers will
want certain proof of the business’s sales and expenses.
In addition to the above, you should also have all other documentation
related to the business handy such as lease or mortgage papers,
property tax statements (if applicable), utility statements etc.
Obtain A Professional Business Valuation
It’s great to think that your business is worth x amount
but the reality is that your business could be worth more or less.
Having an independent business appraisal/valuation is an imperative
step you will have to take. By having a professional business valuation
performed, you will save yourself a lot of time from haggling with
potential buyers over the business’s true value.
Prepare A Detailed Business Summary
Prospective buyers will require a great deal of information in order
to make a purchase decision. This may take up some of your time initially
but will save you time in the long run. Rather than answering a substantial
amount of questions that could be answered in a document or reiterating
many of the facts about your business, potential buyers will have
the facts and information they need to reference on their own time.
The business summary should include
the following:
- The business’s history
- Staff and employment details
- Description of the business’s attributes and (if applicable) its marketplace
- Suggestions for areas of improvement once the buyer acquires the business
- Key competitive qualities of the business and its competition
- Reason(s) for selling
- Description of how much training will be provided to the buyer after the sale
- Asking price
- Business Financials (preferably 3 years)
Get A Letter Of Intent From A Buyer
If you are dealing with a serious buyer, you should have no problem getting a letter of intent and having the buyer commit through an escrow account in the case that their due-diligence be positive. Remember that you prepared a business summary for a reason.
This summary will make your life easier and the buyers as well since it will minimize the amount of time the buyer takes to analyze the business. Potential buyers will have to perform their due-diligence and that is to be expected due to the significance of the transaction. However, the buyer’s investigation into the business should typically not take more that 2-3 weeks. This is why it is important to agree to a signing or decision date within the letter of intent. Make sure that the buyer knows that the business may be offered to others if they procrastinate on making a purchase decision.
It is also important that you negotiate the terms of the sale prior to receiving a letter of intent or offer to purchase. Otherwise, the deal may fall apart in the eleventh hour after you have dedicated a great deal of time with a buyer.
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Related Information:
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Frequently Asked Questions
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