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Austin TX Business Law Blog

Monday, March 30, 2020

What to Do Before Selling Your Business

Building a business is something to be proud of. You have likely poured time, money, and resources into your business. When the time comes to sell your business, you will want to do what you can to maximize its value and also to protect yourself. This requires advance preparation.

What to Do Before Selling Your Business

It is often difficult for a business owner to be impartial in evaluating his or her own interest. After all, you invest so much of yourself and your assets into growing a business that it becomes very personal. It is critical that, when you are ready to sell your business, that you take a look at it as a prospective buyer would. Go through your business with a fine-tooth comb and find those things that will need some attention before presenting the business to a prospective buyer. This means reviewing things like your business processes as well as assets of the business and employment contracts that are currently in place. In regards to employment contracts, a buyer will want to know things like whether or not key executives of the business will remain with the company once it has switched ownership. The buyer will also likely want to know if there are any incentives for these executives to remain with the company or anything in their employment contracts that would prevent them from leaving.

Look at the value of your business from a buyer’s perspective. If you can figure out who would be interested in buying your business and why they would be interested, you are more likely to be in a position to maximize the value of your business when it comes time to sell. Do not focus on the number value you believe your business is worth. Look at the worth from the buyer’s perspective and go from there. Additionally, look at the potential operational weaknesses of your business and work on improving them. Know that you are not likely to be able to completely eliminate all potential weaknesses of your business. For those weaknesses that prove impractical to address, have a plan in place on how to disclose them to a potential buyer. It is best to be forthcoming and honest about these types of thing before a buyer finds out about them on their own.

While you are in the process of getting your business ready for sale, make sure to keep motivating business managers to remain focused on the well-being of the business. An impending sale can obviously be a significant distraction if left unchecked. However, failure to focus on the well being of the business can have serious detrimental impacts including weakening the business as a whole. When it comes time to finalize a sales contract for a business, a buyer will likely look at the recent results of the business. Should they see a drop in things like business earnings, they may either pull out of the deal or ask for a price reduction.

Texas Business Law Attorney

Selling your business is a significant undertaking. There are many moving parts to consider and each can play a substantial role in your business’s value and also on your legal rights and future financial well-being. The Kumar Law Firm is here to protect your best interests when getting your business ready for sale all the way through the actual completion of the sale. Contact us today.


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