If you are planning to sell our business, this how you start. The very first question someone might wish to ask you is – “have you thought this through? ” The first question you would undoubtedly want to ask is “how much could I get for the business?
The answer to your question depends upon how well you have thought it through because pitfalls exist. This will introduce some early essential pitfalls that will not only change the sale price but also whether you can sell the company in any way.
The first thing we must evaluate is precisely what you are selling. Are you currently a sole-trader whereby the company is your name, and all the assets and liabilities are your obligation?
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Is this a partnership – Are partners involved have a monetary interest who will need to approve the deal? Is it a private limited company – Is there other investors to take into account and are all willing to sell?
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It is also possible you are thinking about selling a public limited company – In which case is it possible to get all shareholders approval and are there any special interest to factor in?
In each scenario, there are problems to address from the onset that may stop a potential and send the buyer away without looking back.
If intending to sell a sole-trader business, you will need to be careful of implied warranties. These may include undocumented assumptions, which the buyer might be making. One clear one is that the company can continue being functional even after the owner has already sold up and left.
If this proves not to be the situation then in certain circumstances the buyer of the business might be capable of claiming his money back from the seller personally, while holding onto the business enterprise. Proper preparation is hence critical.
With partnerships and private companies, the biggest problem is coming into an agreement: are all investors and associates entirely in agreement because a change of thoughts half-way through the sale will kill the procedure.
There are specific individual concerns for both partnerships, and private limited companies which need to be addressed right from the beginning and legal advice will be necessary at this stage.
A sale of a Public Limited Organization is made easier by its nature, but its sale will depend on simply how much of the business the customer desires to obtain. In case the buyer wishes to buy 100% of the company, then you need agreement from all shareholders which should be undertaken carefully to avoid share value distortions or accusations of insider trading.
Sometimes, unscrupulous customers may try to interfere with the process so as to lower the market value or force liquidation of the company to their advantage.
Agreement from all selling parties is so vital at the onset of the sale as well as setting the sale value or the minimum price for the business.