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Key Factors To Sell Your Business

Submitted by Michael Cash on
Key Factors Required To Sell Your Business

The Benchmark 'Key Factors' in the sale of a Business Sale

  • Maintaining Confidentiality and Disclosures
  • Reaching the Largest ‘Universe’ of Potential Buyers
  • Achieving the Highest Selling Price
  • Maximizing Your Net Cash at Closing
  • Minimizing Taxes
  • Minimizing Risks and Liabilities After the Sale

The highest price for your Las Vegas business will be realized if the sale is part of a coordinated exit strategy.

If you suddenly need to sell your business and your business is not properly prepared for presentation to  buyers you will be at a severe disadvantage in the market.  In order to minimize these disadvantages you should insure that you are teamed with a Las Vegas business broker who has extensive transaction experience.

“Why should I invest time and money to formalize an exit strategy if I have no intention of selling my business in the foreseeable future?"

In our 23 years of selling businesses in Las Vegas, many of our clients have been forced to sell by unforeseen personal events in their lives. These can include illness, lack of family interest in the business, divorce, and even external financial crises completely unrelated to the business. And not all of these events are negative: even new business opportunities which can’t be delayed can trigger a sale to raise capital. If you are forced to sell your business suddenly-and without a formal exit strategy it could easily cost you hundreds of thousands or even millions of dollars. This is why a proper exit strategy prepared now is critically important. As a business owner, you should take measures today to insure a strong position for a sale if the unexpected does occur. A carefully prepared exit strategy is a kind of insurance policy… you purchase insurance in the hope you never need it…but when catastrophe strikes you are exceedingly glad you have it. Without an exit plan you are essentially “uninsured” against potentially huge losses of unrealized business value when selling your business.

"What should I do to make sure I am ready to sell my business?"

See below a list (your specific business might require different/additional items so feel free to contact us and we can discuss your specific needs):

  • Financial Statements. Your financial statements (for at least 3 years) must be accurate and up-to-date. It is well worth the investment to have a qualified accountant audit your last full years profit and loss statement.  The accrual-based method is the most appropriate method for valuation purposes of your business. Most business owners use a 'cash based' approach for their tax returns as way of reducing yearly tax burden.  However, this method does not generally reflect the true profit picture of the business.  Cash based profit and loss statements will indicate a lower net operating profit than accrual based statements.  This is important to remember when you are ready to sell your business.
  • Make sure that appropriate GAAP accounting practices are used every year and that all assets and liabilities listed on the balance sheet are in fact owned by the business, and that all genuine business assets and liabilities are accurately included. 
  • Liquidate obsolete inventory. Some business owners think that keeping old, non-moving inventory doesn’t really cost anything, and maybe one day you’ll get a call from an old customer needing that exact legacy item. It may not cost money store on the shelf but if you think there is a buyer somewhere who will pay for it you’re likely mistaken. Get an accurate appraisal of your inventory, then liquidate the obsolete and slow moving (or not moving at all) items. This could take time so begin now.  Consider selling unused, inoperable or obsolete equipment. If you can't use  the equipment the buyer can't either. Give it away, sell it or scrap it.
  • Make sure your employment practices are documented and properly applied. Is overtime being paid correctly? Are your employees and 1099 independent contractors being classified properly? Have your employees been screened properly for their jobs (i.e. if you own a daycare/nursery have you performed a background and drug test?). Do all of your employees have legal immigration status?  This is extremely important if your hope is to one day sell your business to a publicly-traded company. There are also your own liability issues to be considered.
  • Make sure your expenses are all legitimate business expenses.
  • Clean up any old partnership or ownership issues.
  • Make sure all tax payments are all up-to-date. Sales tax, FICA, etc.  Sales taxes even run with the busienss, and a new owner would be responsible for paying any unpaid balance to the state.
  • Have a professional business valuation or business appraisal done on the business so you can determine if the value of the business is adequate to provide the cash needed to secure your future.
  • Re-examine your corporate structure and determine what tax issues will need to be addressed to maximize your after-tax cash proceeds. Are you a ‘C’ Corp? If so, speak to your accountant to see if changing to an ‘S’ Corp would benefit you.
  • Consider all legal tax strategies to minimize income and capital gains taxes after the sale.  There are certain legal trusts that can often be used to lessen the burden of these taxes.  Consult a qualified expert in these matters before the sale.
  • The above items are just a few of the things a business owner should be doing in order to get the full business value in the event of a sale.

How do these things increase the value of your business? Because they reduce the risk to the buyer of the business….lower risk for the buyer = a higher price for seller.