When the owner of a business decides it’s time to retire or wants to branch out into other industries, they often choose to sell any current companies that they own. The idea is exciting, but it is crucial to take the appropriate steps to ensure that the business brings in the highest amount of money possible. Before listing a company, the owner should look at the following items, which will help to determine a fair asking price and allow the owner to obtain top dollar upon closing.
The first step in determining the value of a business is to glean a wealth of information from the company’s financial records. A broker will examine the amount of revenue a firm receives over a three year period and subtract any expenses associated with the day to day operations. They will then place a value on any existing contracts that are included as part of the sale.
Another important aspect is the amount of liabilities or debt that a company may currently hold. The debts may be transferable to the new owner, but many potential buyers are not likely to accept a contract term that requires them to absorb any past obligations. Most business brokers recommend paying off any debts before listing a business for sale or include the satisfaction of the liabilities at the time of closing.
The contracts a company holds are typically one of its most significant assets; the problem is that not every contract will convey with a business when it is sold. Hire an attorney to examine any existing agreements and ensure that there aren’t any components that forbid the transfer of the agreement to a new owner. Buyers are more likely to make an offer to purchase if they know that they will have contracts that allow them to receive revenue from the very start.
It is often a struggle to determine how to sell your business. A business broker makes it simple and straightforward and offers support with each step of the process. Contact a broker today to learn more and get a free business evaluation to see just how much a company may be worth on the open market.