How Do I Sell a Distressed Business?
Have you ever wanted to sell a business but weren’t sure how?
If your answer is yes, then this article is for you! First off, there are several things that you need to know about selling a business. The first thing is why someone would want to sell their own company. There can be many reasons behind it such as wanting to retire, burnout of the owner or maybe they just don’t have enough time or energy to run the business anymore. Whatever the reason may be, it’s best that before you start selling your company that you’re 100% sure that it’s what you want. That way if all goes south, at least it’s still something that can get better after some time has passed.
Now that you’re sure that selling your business is the right choice, it’s time to explore your options.
The first option would be selling the company as-is. This usually includes anything that has to do with what happens with any ongoing projects or deals you have with other companies. If this option is chosen, there is no guarantee on how much money you will make for your business; however , there are certain ways to make more money this way which will be discussed later in the article.
The second option would be selling only the assets of the business . With this option, all of the current ongoing deals and projects are included but not any physical property . For example, if you own a shoe store then obviously you own the shoes and you can sell those, however , if your store is located on a certain property then that’s not included. If this option is chosen, then there is no guarantee of how much money you will make; however, it will be more guaranteed than selling as-is .
The last option would be to sell only the liabilities of the business. This means anything that you owe such as unpaid bills or contracts with other companies. Again, if this option is chosen there is no guarantee on how much money you will make; however , it will be more guaranteed than selling as-is .
Now let’s discuss what you need to do before even starting the process of selling your business:
.) Make sure all employees are notified about the selling of the business.
.) Have a plan on what to do with your ongoing deals and projects.
.) Make sure all the financial records are up-to-date before starting any transaction.
Once you have completed these tasks it is time to start selling! There are 4 main stages to sell a company: 1.) Preliminary research 2.) Finding good options 3.) Due diligence & legalities 4.) Negotiations & Closing Of course there’s much more detail then that, but that’s just for an overall view of how it will be done step-by-step. Now let’s begin!
The first thing you want to do is make sure there are other buyers around . If not then you will need to consider other options such as selling the company “as-is” (we will get to that later) or closing it down. Once there are other buyers around, next thing you want to do is make sure they are qualified buyers . Now this does not mean they have to be someone who has done business before; however , if you’re selling a restaurant then obviously there should be some kind of cooking experience in order for them to qualify. Also, if it’s an online company then custom programming skills would also be necessary for them to qualify. Once these possible buyers are qualified then the only thing left is too find out how much money each one will pay. This brings us into our next topic which is figuring out how much your business is worth . There are many factors that go into this such as what your current revenue and expenses are , how much money you have in the bank & invested, how much time you plan to work after selling, where your business is located and so forth. These will all factor into how much each buyer will be ready to pay for the company.
Once it’s determined how much each buyer will pay , now we can put a price on our company. This means we need to figure out what we want to sell it for . There are many ways of doing this such as taking your lowest possible price and then adding 20-30% extra just to be safe or whatever percentage you feel the market should dictate the value at. The other option would be to take the highest amount each buyer is willing to pay and then take 20-30% off of that price. Whichever option you choose, it’s important to stay firm with your decision as there could be consequences if not thinking about this thoroughly.
Now let’s begin the four stages we previously discussed!
Preliminary research: Take your time when doing your research as trying to rush into this will only benefit you a little bit but hurt you a lot later on due to a possible deal going wrong. Another thing you should take into consideration is gathering information from companies similar to what yours is selling, especially those who have sold within the past year or so. More information gathered from these companies will truly help you with your selling decision.
Finding good options: With all of the research you’ve completed, this is where you will need to narrow down the list. It’s important to not get too carried away with just a couple of options as it can be very time-consuming and costly if that happens. The easiest way around this is by choosing only 2 or 3 companies at most for this part.
Due diligence & legalities: Know what you’re getting into when performing due diligence and legalities. It may sound easy and quick; however, there’s much more detail involved such as evaluating contracts, potential contingencies (wording, jurisdiction, etc), analyzing data provided by the company, business interruption insurance/warranties, and so forth.
Have you ever wanted to sell a business but weren’t sure how? If your answer is yes, then this article is for you! First off, there are several things that you need to know about selling a business. The first thing is why someone would want to sell their own company. There can be…