Selling a business you’ve poured your blood, sweat, and tears into can be just as exciting as starting a business.
After all, it’s proof that all your hard work paid off. Or course, selling a business in Florida isn’t a decision that should be taken lightly.
Considering the state of your business and what you’ll do next will better prepare you for the entire process.
“Selling a business is one of the most profound actions that an entrepreneur ever takes. The process requires careful planning, hard work, and a good support team.”Business Transactions Attorney Trevor Brewer
1. Ask Yourself: Is It the Right Time to Sell?
It’s easy to get caught up in the process of marketing and selling your business. Keep in mind, however, that there is a right time to sell. Market conditions, shifting consumer interests, and availability of competitors all affect whether you’re in a seller’s or buyer’s market.
As when selling a house, you should consider whether it is the right time to sell your business. Although there’s no exact way to do so, it’s often a good idea to evaluate the market conditions around the time you plan to sell; consider consulting industry experts or analysts who can give you advice.
Then, before committing to a sale, ask yourself, Do I need to sell now? Or can I wait a year or more before putting my business out there?
2. Is the Buyer the Right Person for Your Company?
Over time, your business becomes as much a personal endeavour as it is a professional one. This is especially true if you’ve been there since the beginning. As a result, it isn’t surprising if you’ve developed at least some emotional attachment to your business.
Although it’s generally a good idea to remove emotions from the equation when it comes to selling a business in Florida, you can still consider whether you are comfortable with a potential buyer’s approach to your business.
If their beliefs and goals don’t align with yours, are you still okay with the approach they might take?
For example, would you care if the buyer purchases your business, guts it, and moves on? Or would you rather find someone as passionate as you are in taking your business to the next level?
The answer to these questions may change during the sale process, but considering them early gives you the chance to lay out your priorities before it’s too late.
3. Have an Exit Strategy
Business owners often find themselves hyper focused on building their business. Over time, doing so becomes as much a hobby as it is a job.
As a result, they rarely consider how the business (or at least their involvement in it) will end. Accordingly, it is important to take some time to develop a proper exit strategy before putting your business out there.
For example, you might consider
- Whether you want to transition to a new role within the company leadership as part of the sale;
- Whether you are financially prepared for a possible non-compete period after the sale;
- How you will manage or invest the proceeds of the sale; and
- Whether it is time to retire.
When you’ve spent so much time growing your business, selling it can leave a hole in your daily routine. Accordingly, make sure you carefully consider how the sale will affect your life outside the business as well.
4. Take an Honest Look at the Strengths and Weaknesses of Your Business
No business is perfect. Honestly evaluating where you can improve helps determine what your business is worth and whether it is time to sell.
There’s no specific approach to this consideration, but looking at your business from the perspective of a potential buyer may be enlightening. Ask yourself, What does my business have to offer?
- Do you have a strong customer base, or is much of your business concentrated in just a handful of clients?
- What valuable intellectual property or brand recognition do you have?
- How do your revenue and profit compare?
If you’ve grown your business as a labor of love, then you may have some difficulty admitting its flaws.
However, remember that when selling a business in Florida, buyers act based on what the business is like right now, not based on potential. If there are weaknesses, addressing them early can significantly increase the value of your business.
5. Familiarize Yourself with the Process of Selling Your Business
In a perfect world, you’d have buyers lining up at your door ready to accept whatever terms you offer. In reality, the process is much more complicated than that. Depending on the nature of your business, your industry, and market conditions, simply finding a buyer may be extremely difficult.
Accordingly, it’s a good idea to familiarize yourself with what selling your business in Florida actually looks like. Generally, you can expect the following steps:
- Find a broker: Unless you already have a willing buyer, the first step is usually to find an agent or broker who will connect you with one. Your broker should be familiar with your industry and trustworthy to act in your best interest.
- Appraise your business: Even before finding a broker, you need to get an appraisal of your business’s value. There are many ways to value a business, including using earnings before interest, depreciation, taxes, and amortization (EBITDA) or with the discounted cash flow method (DCF).
- Broker contacts potential buyers: Your broker will send an offer memorandum or “teaser” to potential buyers. This letter presents the value proposition of your business to any buyers. As a result, this letter is incredibly important and should be drafted by a professional.
- Buyer responds: If a buyer is interested, they will take some time to conduct due diligence to confirm that what you’ve said about your business is true.
- Hire an attorney: If you haven’t already, hiring an attorney will be necessary from this point on. If you try to sell your business without professional help, you run the risk that the buyer will take advantage of you and make an unfair offer.
- Negotiate the details: If the buyer is satisfied with their due diligence review, you will negotiate the details of the sale, including purchase price, bonus options, and your role after the sale is complete.
Once the paperwork is all signed, congratulations! You’ve just sold your business.
Closing the Deal
Although it looks straightforward on paper, remember that the process may take between six months and a year or more. Also keep in mind that unforeseen challenges can occur at any time, which may add additional steps or time to the sale.
To make sure you get what you want and need out of the transaction, it is crucial that all sale documents be prepared properly.
Even if you’ve been handling things mostly on your own up to this point, this step requires the help of an Orlando business attorney. Even if your business is on the smaller side, it is worth it to consult with someone who can make sure you get the best (and fairest) deal possible.
6. Objectively Evaluate Your Company’s Worth
It can be difficult for business owners to value their company properly. This is because when you’ve put so much time and effort into a company, it becomes nearly impossible to separate your personal feelings about your business from an objective valuation.
To avoid this problem, make sure you hire a qualified business appraiser whose opinion you trust.
Keeping this in mind before you even make the initial offer to potential buyers will help temper your expectations about a possible sale price. In turn, you’ll be better prepared when it comes time to negotiate.
7. Balance Transparency and Confidentiality
When communicating with potential buyers, it may be tempting to lay everything bare about your business.
This could be either with hopes that your honesty will boost the total valuation (if everything looks good, how could they say no?) or as the result of overcompensating for the fear that you won’t disclose enough.
No matter the reason, doing so may be very damaging in the long run.
Keep in mind that you may have multiple interested buyers, and each one may receive some confidential information even if they don’t end up as the final buyer. Establishing clear confidentiality rules will prevent prospective buyers from abusing the information you provide.
8. Don’t Rush to Act on the Purchase Price
A high dollar amount can be intoxicating. But remember that compensation comes in other forms as well. During negotiations, consider leadership positions, stock options, and other ownership stake options in lieu of some of your cash selling price.
You may be able to increase your overall worth by doing so as well as align the sale with your exit strategy.
Ready to Sell Your Business?
BrewerLong is an Orlando-area business law firm proudly representing small and medium local businesses. We provide friendly, approachable legal assistance with business transactions and other business law matters.
If you’re interested in selling your business, we can help you make sure you do it the right way. Contact us today online or give us a call at 407-660-2964 to schedule an introductory consultation.
This blog post is provided on an “as is” and “as available” basis as of the date of publication. We disclaim any duty to update or correct any information contained in this blog post, including errors, even if we are notified about them. To the fullest extent permitted by law, we disclaim all representations or warranties of any kind, express or implied with respect to the information contained in this blog post, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title, non-infringement, accuracy, completeness, and timeliness. We will not be liable for damages of any kind arising from or in connection with your use of or reliance on this blog post, including, but not limited to, direct, indirect, incidental, consequential, and punitive damages. You agree to use this blog post at your own risk. Regarding your particular circumstances, we recommend that you consult your own legal counsel–hopefully BrewerLong.