Common Questions about Selling a Business
Many business owners put off selling their business for years because they have so many questions and don’t know who to talk to when working through them. The business attorneys at Calkins Law Firm have worked with hundreds of clients over the years. Following are some of the most common questions we get about selling a business.
How much is my business worth?
An attorney typically won’t put a specific dollar value on a business; there are just too many factors involved in pricing a business. But what an attorney can do is advise in a general sense about value. They know how to help you determine your strengths and weaknesses and come to a general idea of what your business is worth. An experienced business attorney can also help you find a professional who can put a valuation together for the business.
How do I get the business ready to sell?
There is a lot that goes into getting a business ready to sell and a good starting point is for the seller to essentially perform due diligence on the company. Figuring out your company’s strengths and weaknesses will give you a clear picture of what you need to do to get the business ready to sell. A seasoned attorney who has prepared businesses for sale can make sure that all relationships that matter are documented, that all permits and approvals are in place, and anticipate issues that the prospective buyer is likely to have — addressing them ahead of time.
How can I make sure I get paid when I sell my business?
When selling a business, sellers prefer all cash at closing but that is not always possible. It is much more likely that the seller takes a note, earnout or other deferred form of payment. Doing this can help you sell your business but there are many contingencies to consider. An experienced business attorney can draft language in the contract that will help quantify and assure payment to the seller.
How long does it take to sell a business?
A business seller can plan on the process from soup-to-nuts — including getting the business ready to sell — taking a year or two. In some cases, the process of selling the business can be accelerated with a motivated buyer who is represented by experienced business attorneys.
What do I need to show the buyer during due diligence?
When selling a business, a thorough buyer will want to see pretty much everything related to the business starting with the financial statements. Typically, the last thing that a seller lets the buyer look at is the customer list. As part of that, calling customers is one of the last steps a buyer will take because the seller won’t want to risk jeopardizing customer relationships if the sale doesn’t happen.
How do I keep this process a secret so employees don’t get spooked?
Business sellers are typically concerned about confidentiality during the sale of a business. A primary concern is that employees might jump ship if they are worried about their future at the business. Concerns about keeping the sale confidential can be allayed by having a select few from the seller’s team involved in the sale process. However, at some point an announcement has to be made to the employees about the sale. A business attorney who has handled many business sales in their career understands this and will do everything possible to maintain confidentiality in the sale process.
Should I Offer Seller Financing?
Sellers prefer not to offer financing but fairly often it is necessary. Ideally the seller will have a note and collateral to guarantee payment. However, a buyer’s bank might not permit the seller to take a lien on collateral or might want that lien subordinated. Seasoned business attorneys can negotiate to maximize the likelihood that the seller will actually be paid the purchase price and any other amounts in full.
What Agreements or Contracts Do Buyers Need to Sign?
There is always a stack of paperwork when selling a business. Examples of common agreements and contracts in the sale of a business include: Asset Purchase Agreement; Employment or Consulting Agreement; Real Estate Purchase or Lease Agreement; Promissory Note; Security Agreement; Subordination Agreement; Assignment, Conveyance and Bill of Sale; and an Assignment and Assumption Agreement. A sophisticated business attorney will be familiar with all the possible documents, which ones you need and what they should say.
Selling a Business Requires an Experienced Business Attorney
You need to work with an experienced business attorney in order to ensure that you get the best sale price for your business. Buyers want to see that you have your house in order. They want to see documentation that backs up your claims about the strength of the business. An attorney with diverse experience selling a business can help you get your business ready to sell and get top dollar for it. Call Calkins Law Firm today to learn more about how we can help you sell your business.