The most important aspect of any negotiation involving the sale of your business is the price. How much do you sell your business for?
A prospective buyer will approach you with a Letter of Intent (LOI) which will include an offered purchase price. How you respond depends primarily on how you value your business. When it comes to appraising the value of your company, accuracy is key. Pricing too low can cheat you out of the compensation you deserve while pricing too high can prevent the transaction from occurring. Valuation chiefly involves assessment of the nature of your business, the market in which it operates, all assets and liabilities of the business that are to be included in the sale transaction, the management and day-to-day operation practices of the business and all other core elements of the enterprise. Valuation also involves consideration of what the business is worth to you, this aspect may not be objective and may not factor into any offered price but is something you must consider when deciding to sell your business.
When valuing your company, you must consider:
How much profit does your business generate?
How is your industry currently performing?
How is the industry forecast to perform in the future?
How are other similar companies doing
What is the general economic outlook?
Options remain even if your business is not turning a profit. Your business can have value in other ways. You can sell your entire business or just your business assets. You may have excellent brand recognition (intellectual property value) or a deeply engaged customer base. Your business may own a substantial amount of equipment or property that can be sold.
Your lawyer will help assess your situation to make the best decision that matches your goals. The legal team at The Kyle Law Firm will ensure that your interests are represented in your business purchase agreement and throughout the entire transaction involving the sale of your business. This importantly includes drafting the terms of the purchase agreement to ensure that all compensation and other consideration contemplated in the transaction are included in the agreement, and that the agreement addresses all applicable legal issues prior to signing any business purchase agreement anticipated resultant of buyer and seller negotiations.
Other Considerations when Selling Your Business
Selling your business can be a challenge, and often an emotional experience as well. If you are closing your business and selling all assets, you may not care who buys as long as the deal is quick and profitable. But if you care about the company continuing your vision, you may want to sell only to someone you trust. This is especially true if you expect to enter into a partnership or shareholder agreement under the terms of the sale.
You may have a buyer in mind already, perhaps a business partner, employee, relative or even a competitor who’s ready to take over the business. However, when it comes to buyers outside your company or industry, you should investigate their background as much as they evaluate your business.
Why does this buyer want to buy your company?
Does the buyer’s vision align with yours?
Does the buyer have any experience in your industry?
Do they have an established record of owning your type of business?
Are the buyer’s financial and operational procedures transparent and sound?
Is your buyer’s business culture a fit for your company?
How much ownership interest will each of you have?
You should always have legal representation for complex transactions such as business purchases. The legal team at The Kyle Law Firm will draft a business purchase agreement that includes the contracts and terms for selling your business or assets.
Ready to get started? The attorneys at The Kyle Law Firm can help, give us a call at: 225-293-8400 to speak with a lawyer about your options for selling your business.
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