One of the most difficult decisions a business owner will have to make in their career is deciding to sell their business.

The sale process can be a long, stressful, physically and emotionally draining, and disruptive to ongoing business operations. Planning well in advance of the desired sale date and engaging experienced professional advisors will help facilitate the sale process, reduce stress and anxiety, minimize the disruption to the business, help reduce the cost and expense of selling (e.g. professional fees) and maximize the sale price.

Using the sale of a personal residence as an analogy, prior to listing the home for sale the homeowner will typically make long needed repairs and improvements to the home to make it more attractive to a potential buyer and will hire an experienced real estate agent to list the house and assist in the sale process. The goal, of course, is to distinguish the home from others on the market and quickly attract a number of interested buyers bidding against one another resulting in maximizing the sale price.

Similar concepts apply when selling a business. Taking the time and effort to get the business organized and ready for sale will make the business more attractive to potential buyers, reduce the stress and anxiety that arises from the sale process (e.g. responding to a myriad of requests from the buyer and your professional advisors while at the same time running the day-to-day business activities), and maximize its value.

Getting the business organized and ready for sale, while it sounds simple, is a time-consuming process and often requires the help of several people within the organization. It should include, among several other action items:

• making sure financial records (including budgets and forecasts) are up to date and accurate with related party transactions easily identifiable;
• the facility and equipment are clean, orderly and not in need of any major repairs or updates;
• all rights to ownership in patents and other intellectual property have been assigned and transferred to the company;
• the corporate minute book and ownership ledger and transfer documents are complete and up to date;
• all contracts material to the business (including purchase orders) can be easily located;
• all corporate policies are up to date and comply with applicable laws;
• all tax returns (income, withholding, property tax, franchise, sales and use, etc.) have been filed, taxes paid, and all tax elections (e.g. subchapter S election) are valid and still in effect.

Staying with the sale of a personal residence analogy, homeowners typically hire an experienced real estate broker to assist them with the sale of the home. The broker will facilitate the sale process, reduce the stress and anxiety of selling, and, hopefully, maximize the sale price. Again, similar concepts apply when selling a business. Engaging experienced legal counsel and other professional advisors will facilitate the sale process, help alleviate the stress of the sale process and disruption to the day-to-day business operations and should help maximize the value for the business. The transaction documents involved when selling a business are usually lengthy, complex and contain a number of nuances that require the assistance of experienced legal counsel and other professional advisors. The buyer typically prepares the initial draft of the transaction documents which will contain many provisions favorable to the buyer, including post-closing purchase price adjustments. Experienced professional advisors will level the playing field to ensure the transaction documents are properly negotiated which, among other things, will reduce the seller’s risk for unanticipated purchase price adjustments and potential liability following the closing of the transaction.

Deciding when to sell your business will be one of the toughest decisions you make as a business owner. Proper planning prior to beginning the sale process is critical to ensuring the sale process goes as smoothly as possible and will help you maximize the price you receive and deserve.