Tips for Selling a Business in California
There are many reasons to consider selling a business, and there are just as many things to consider before and during the process. To streamline a sale, it would be helpful to be (or get) highly organized, making sure all assets are in order, the logistics of an exit strategy are in line, and all legal forms are squared away.
There will be a lot to do to prepare for the sale, so the best thing to do is begin the process as soon as possible before the actual sale. You will need this time to improve the way you store and organize financial records and make sure your business structure is formed and maintained properly. For example, depending on your business’ structure, state laws may require annual report filings and maintenance of certain records or meeting minutes. By making sure these are in order and fixing any deficiencies, you will also make the transition easier for the new buyer.
Naturally, before even listing your business for sale, you will want to make sure the business looks good on the outside. Professional cleaning and equipment repair might need to be done. But you also need to make sure everything is equally attractive to a buyer on the inside, meaning that all legal and administrative dealings are in order. Communicate your plans to sell to your staff, and determine if one of them can take on your role. Your business may be more attractive to buyers if there is already someone in place to do your job. Keep in mind, however, that there are often buyers looking to hire their own staff. Bring this up in negotiations if keeping your staffs’ jobs is a priority to you.
Make sure all your legal and tax documents are well maintained and organized. Specifically, buyers will be asking to see, among other things, your balance sheets and tax returns from the past 3-5 years, profit and loss statements, bank statements, lease and vendor agreements, entity formation documents, and license information.
Finally, having your business priced appropriately will make it more attractive to a potential buyer. Work with a business appraiser early in the process to see what improvements you should make to get a better price, then again right before listing. The appraiser should draw up a detailed explanation of the business’ worth, bringing credibility to the asking price. It is also recommended that you work with an attorney on drafting the actual sales agreement to make sure you are protected from future liability.