Preparing Your Company For Sale

The aftermath of building a business is moving on to the next chapter and navigating the logistics of transferring business ownership, which can be difficult for the uninitiated.

Before preparing for negotiations, savvy sellers forge a head start through gathering data on their competitive position, asking price, and ideal buyers.

One of the most important decisions to be made as an entrepreneur is whether or not to sell your company. With a little planning, it is possible to increase the value of your company and ensure the best possible sale price.

According to a 2011 survey conducted by the Canadian Federation of Independent Business, just over half of business owners who intend to leave their company do not have a succession plan in place. [1]

Asset valuation and sale

Decide whether you will set a price for the entire company or for individual assets. When calculating a valuation, don't forget about intangibles like goodwill and intellectual property. While this figure is critical, it is also critical to find the right buyer for your company. When it comes to selling your business, there is a distinction to be made between value and price.

Assets may be appealing—your company may be more valuable in pieces than as a whole. A buyer, for example, may find your real estate holdings more appealing as an asset than the entire business.

Confirming business value

Many other factors, such as goodwill, intellectual property, and the location of the company, can influence valuation. A valuator typically seeks to confirm EBITDA by using other valuation approaches, first calculating the value of the company's tangible and intangible assets and, second, determining the price at which a comparable business was sold.

The profitability of your business, as well as the records to prove it, are critical in determining the business value.

Passing the company down to close-knit members of the community can provide better business continuity but will most likely result in a lower sale price. Selling to a third party or another company can result in a higher price, but it will necessitate more thorough transition planning.

Capital Assets should be updated in view of this. Examine all of your capital assets, including technology, infrastructure, and equipment, objectively.

Upgraded assets provide a new owner with more years of depreciable value. They also save the owner the trouble of having to do the upgrades themselves.

Financial settlement negotiations

Consider your company from the standpoint of a buyer; the most likely buyers of your company will typically pay the highest price; identify who they are and how they evaluate value so you can prepare your company to maximise valuation and competitive tension on sale.

Buyers rarely show up with cash in hand to purchase a business because it can necessitate a significant financial investment. Typically, business sales necessitate some form of financing, which is frequently provided by multiple parties. They can consist of the buyer, bank loans, developmental and bank loans. Keep in mind that the highest price does not always imply that the buyer is the best fit for your overall goals.

References

[1] How to prepare your business for sale

https://www.bdc.ca/en/articles-tools/change-ownership/sell-business/how-to-prepare-your-business-for-sale