Important Issues

                        Important Issues You Need to Consider Carefully

Do not rule out any option before discussion and consideration. Many people tend to make snap judgments without learning and understanding the implications of different options.

Why are you selling?

Every prospective buyer is going to ask this question. You need to prepare a response and think through your answer. It’s not enough to give a reason for selling the business: you should also be willing to answer questions about your reason.

What will you do after you sell?

This is the most important question you can ask yourself. If you’re selling because you’re tired and burned out, you might want to get some people like us to look at what you are doing and offer you some advice before you sell. Consulting is much less expensive than you think, and more often than not, it saves your business. All owners wear several “hats.” Unfortunately, they often ignore those areas of the business that require some special knowledge and expertise. They may lack knowledge and ability, or just not have the time or resources to learn what it takes to get up to speed in that particular discipline. The place where I see this most often is in accounting, a critical area that is all too often delegated to an accountant. (See Consulting.)

What are the tax ramifications?

If, after selling the business, you discovered that you could have saved $20,000 to $200,000 in taxes by structuring the sale differently, wouldn’t you feel stupid? Understand the tax ramifications before you speak with the first prospect. In many cases, the tax and legal implications determine the deal structure.

Custom-developed software

If you have paid a programmer to create a special piece of software, you may think that you own the software. However, you may not own it. Software ownership is a copyright issue: in all the cases I have come across, the programmer owned the software because the business owner didn’t structure the software development agreement correctly.

Employee non-compete agreements

It is advisable to get non-compete agreements from your key employees before putting up the “for sale“ sign. This will protect you in case a prospective buyer decides it’s cheaper to hire your employees away for a few extra bucks than it is to buy your business. There are several ways to do this without creating problems with your employees. I would also recommend that you not advise the employees of your attempt to sell the business.

Business problems

Problems like these should be addressed before the “for sale” sign is hoisted:

Unreported Cash

Client Concentration

Marketing

Franchise Issues

Losing Money

Unhappy Partners

Lawsuits

Bad Publicity

Bad Inventory

Competition

Real estate

Think very carefully about whether real estate should be part of the sale or kept separate. If you take back any “paper,” I would recommend that you keep the property to protect yourself in the event that you need to foreclose on the note. There are many different options and reasons to handle it differently, but ultimately the decision will depend on the overall deal structure.