Between the months of July and September, close to 2,000 small businesses will be bought and sold. Deciding to sell a small business can be one of the toughest business decisions an owner can make. To prepare for the sale process, small business owners can take the following important steps.
Know the Market
Selling at the right time can be the difference between small or large profits. Thorough research is necessary to ensure a business is offered for sale when the market is competitive. Small business owners should consult industry trends and market demands prior to listing their businesses for sale. It is generally better to avoid selling when sales are declining as this makes the business much less attractive to buyers.
To avoid a forced sale, small business owners should prepare for unexpected events such as the death of the business owner, decreases in product demand, or unforeseen business downfalls. Having contingency plans in place can allow sales to occur at more beneficial times and not out of financial necessity. For this reason, developing appropriate “exit strategies” is the suggested first step when preparing to sell a business.
Hire a Business Lawyer
Selling a business can raise important legal issues related to title transfers, tax implications, valuation of the property, and transfer of licensing arrangements. Hiring an experienced business lawyer to help navigate the sale process is crucial to ensure there will be no legal complications in the future.
Experienced business lawyers can ensure the Agreement of Sale includes all the necessary provisions, including inventory lists, payment terms, conditions related to accessing business information, responsibilities for compliance with state or federal regulations, and broker fee agreements. Business owners using a lawyer to help with the process have an important advantage in the sale negotiations leading to greater profits.
Prepare Financial Records
Cleaning up the financials of the business is another essential step when preparing to sell a small business. Most buyers will request financial proof of business assets and liabilities, including an adequate reflection of business income. To provide this, sellers should make sure all ledgers are up to date and financial statements are clean of any legal improprieties. Tax obligations should be paid in full and copies of business tax returns should be available upon request. Unaccounted income or hidden assets can devalue a business and result in a lower sales price. Savvy buyers will be doing due diligence to ensure the business is what it seems.
Secure Competitive Advantages
Investors will be drawn to businesses that have a competitive edge in the market. Small businesses should secure the necessary intellectual property rights including trademarks, copyrights, and patents prior to putting the business up for sale. Non-compete agreements and other types of restrictive covenants can be used to prevent ex-employees from working for competitors. Small businesses working in high tech industries can enter into confidentiality agreements to protect their most valuable assets. These types of competitive advantages are important when placing a small business on the market.
Philadelphia Business Lawyers at Harty Law Group Handle Small Business Sales
If you are a small business owner looking to buy or sell a business, the experienced Philadelphia business lawyers at Harty Law Group are here to help. With offices conveniently located in Philadelphia and Haddonfield, New Jersey, we proudly serve small businesses owners throughout Pennsylvania and New Jersey. To schedule an initial consultation with an experienced Philadelphia business lawyer at Harty Law Group today, call us at 267-383-3899 or submit an online inquiry form.