Last week, we discussed certain things to consider when selling or purchasing a business. Today’s article continues that discussion, specifically, preparing your business for sale or expansion.
Is now the time to sell your business? Or is it time for you to expand your business? Or do you stand pat? Regardless of the answer, one thing you can do is prepare your business for any of these outcomes, so that you are in a good position to act when it comes time. Too often these decisions come about as a illness or death in the family, and it leaves those who are left behind in a difficult position if preparations haven’t been undertaken.
Another thing you can do is to get your financials in order. Even if you think you are on top of things, if you are doing your financials yourself, with QuickBooks or something similar, a professional audit of your finances may be a good idea so that you really are where you think you are.
What about your inventory? What kind of shape is your equipment in? How far has it already been depreciated? Do you have equipment, or goods, or other assets that are currently encumbered? Have you divided your businesses into different corporate entities or are they all housed under one corporation or LLC?
You might also take inventory of your current management team. How is your team performing? Your management team is likely to be in different places in their respective lives – how much longer until you may need to replace some of your key employees? Do you have employees who will be with you for another 20 years? Are your employees only working for your company because of their relationship with you, or are they also loyal to the company? These are crucial questions to answer, especially if you are considering selling your business, and employment contracts and noncompete agreements and other instruments may be helpful.
If you are thinking about selling, what are you planning on doing afterward? Do you envision yourself staying on for a couple of years, drawing a salary and providing your experience to the new owner? Do you want to be done as soon as closing is over, and never look back? Do you want to ensure your key employees will remain working once the new owner comes in?
Perhaps most importantly, what are your expectations about a potential sale price? Are you ready to pay capital gains taxes on the income you receive from a sale? Do you want to hold off paying capital gains taxes right now, and put your money into a new investment or business venture, utilizing 1031 exchanges? Would you prefer a lump sum or to be paid out over a number of years?
Regardless of where you are with your business, you may want to have things shored up prior to making any significant decisions. We would be happy to sit down with you and discuss these issues and any others that affect your business.