So you’ve decided it’s time to sell your business? Whether you’re ready to retire, chase a new opportunity, or just cash out, getting the maximum value for your life’s work is likely top of mind. But selling a business fast while getting top dollar can be an uphill battle.
On one hand, you want to find a qualified buyer and close the deal quickly before circumstances change. On the other hand, you don’t want to leave money on the table by accepting a lowball offer or bungling the negotiations.
The good news is, with some savvy strategies and by avoiding common pitfalls, you can have your cake and eat it, too.
Before you can begin the process of selling your business, you need to understand what it is truly worth in the marketplace. This is where a professional business valuation comes into play.
In North Carolina, specific laws and regulations govern the valuation of businesses, so it’s crucial to work with experienced professionals who understand the nuances. They’ll take a deep dive into various factors that impact your company’s worth, including:
By getting an objective, third-party valuation, you’ll have a solid benchmark for setting your asking price and managing expectations during negotiations.
Think of this as the “staging” phase of selling a house – you want to present your business to potential buyers in the best possible light. This involves a comprehensive review and optimization of several key areas:
Ensure your books are impeccably organized and highlight profitability and growth. Buyers will scrutinize your financial statements, so leave no room for ambiguity.
If your business has a physical location, real estate, or specialized equipment, make sure everything is well-maintained and up-to-date. A fresh coat of paint or minor renovations can go a long way.
Review all existing contracts, leases, and agreements to ensure they are transferable to the new owner without any hiccups.
Document your business processes, systems, and workflows to demonstrate operational efficiency. Have a continuity plan in place for your employees and critical roles.
By taking the time to optimize these core areas, you’ll increase your business’s appeal to buyers and streamline the due diligence and transition processes later on.
Engaging a professional business broker can be a game-changer in facilitating a smooth, efficient sale for many business owners. These professionals have extensive networks and specialized knowledge that can be invaluable.
A reputable business broker can significantly accelerate the selling process by:
While their services come at a cost (typically a percentage of the sale price), a skilled broker can often negotiate a higher selling price that more than offsets their fees.
Not all business brokers are created equal, so it’s essential to do your due diligence in selecting the right partner. Here are some key factors to consider:
Interviewing multiple brokers and thoroughly vetting their qualifications can pay dividends in the long run.
While engaging a broker has its advantages, some business owners opt to go the “for sale by owner” route and handle the sale process themselves. This approach has its own set of pros and cons to weigh carefully.
If you do choose to sell your business directly, be prepared to invest significant time and effort into marketing strategies like:
You’ll also need to develop a systematic process for screening and vetting potential buyers, conducting due diligence, and negotiating favorable purchase terms.
Whether you’re working with a broker or selling directly, effectively marketing your business to the right audience is crucial for a successful, timely sale.
Think of this as your company’s “resume” – a comprehensive yet concise document that showcases your business in the best possible light. An effective prospectus should include:
This prospectus will be your primary marketing tool, so invest the time and resources to make it professional, visually appealing, and compelling.
In today’s digital age, having a strong online presence is essential for reaching potential buyers. Work with your broker (or independently) to list your business on reputable “businesses for sale” platforms or industry-specific websites.
Don’t overlook the power of traditional advertising either. Placing targeted ads in niche industry publications, local business journals, or even mainstream media can expand your reach and catch the attention of qualified buyers.
Sometimes, the most effective marketing strategy is leveraging your existing network of contacts and relationships. Spread the word about your intention to sell through professional associations, industry events, and personal connections. You never know who might be interested or able to make a valuable introduction.
Once you’ve successfully marketed your business and received interested offers, the real work begins – navigating the selling process itself.
Prepare for an extensive due diligence period, during which potential buyers will thoroughly vet every aspect of your business. Have the following materials ready:
Being transparent and responsive during due diligence can aid in building trust and expediting the process.
Once offers begin coming, it’s time to put on your negotiating hat. Work closely with your broker (or legal counsel if selling directly) to evaluate each offer’s terms, structure, and contingencies.
Don’t focus solely on the headline purchase price – factors like the deal’s structure, earnout provisions, non-compete terms, and the buyer’s financing capabilities should all be considered in your decision.
Once you’ve selected a preferred buyer and negotiated the key terms, the next step is executing a legally binding letter of intent (LOI). This document outlines the basic deal points and serves as a framework for the final purchase agreement.
In North Carolina, purchase agreements for business sales must adhere to specific legal requirements and properly address issues like:
It is highly recommended that you have an experienced business attorney review and negotiate the purchase agreement on your behalf.
After the purchase agreement is signed, the closing process begins. This involves finalizing any remaining due diligence items, coordinating the transfer of assets and operations, and handling the actual exchange of funds and ownership.
Depending on the complexity of your business, the closing process can take several weeks or even months to complete.
Even after the sale is officially closed, your journey isn’t quite over yet. Most purchase agreements include provisions for a transition period, during which you’ll work closely with the new owner to ensure a smooth handoff.
Chances are, the buyer purchased your business precisely because of the specialized knowledge, processes, and relationships you’ve built over the years. Leverage this transition period to comprehensively train the new owner on all aspects of operations, from nuts-and-bolts procedures to the more intangible elements like your company’s culture.
In some cases, sellers may choose (or be contractually obligated) to remain involved in an advisory capacity for a predetermined period after the sale. This arrangement can benefit both parties:
It’s fairly common for purchase agreements to include non-compete clauses that restrict the seller from directly competing with the business they just sold for a specific period. While generally not favored in North Carolina, these agreements are typically enforceable as long as they are reasonable in scope and duration.
Last but certainly not least, you’ll need to be mindful of the significant tax implications that come with selling a business. Depending on the sale structure and your specific situation, you may be liable for capital gains taxes, state income taxes, and other levies.
We strongly recommend working closely with an experienced tax professional and attorney to ensure you maximize your net proceeds while remaining fully compliant with all applicable regulations.
As you can see, selling a business is a complex, multi-faceted process with numerous moving parts. To ensure your journey is as smooth and efficient as possible, keep these tips in mind:
Regardless of your reasons for selling, always remember that this isn’t just a business transaction; it’s the culmination of your entrepreneurial journey. By being well-prepared, working with the right team, and maintaining perspective, you can increase your chances of a rewarding experience and efficient sale process.
If you’re a business owner in North Carolina considering your next move, our team at Johnson Legal is here to guide you through every stage of the selling process. With decades of combined experience in business law, mergers and acquisitions, and tax planning, we can ensure your sale is handled with professionalism, diligence, and an unwavering commitment to your best interests.
Don’t try to handle this translation alone – contact us today to discuss your situation and how we can help you achieve a smooth, efficient sale that paves the way for your next exciting chapter.
Shane T. Johnson is the CEO and Managing Partner of Johnson Legal, an estate planning and business law firm in Wilmington, NC. With years of experience in estate and business law, he has zealously represented clients in various legal matters, including small business formation and purchasing, estate planning, probate, domestic violence, and other legal cases.
Shane received his Juris Doctor from the University of Wyoming and is a member of the North Carolina Bar Association. He has received numerous accolades for her work, including being named among the Best Probate Lawyers in Wilmington by Expertise.com.
