Issues to Consider Regarding Selling My Business

Issuesto Consider Regarding Selling My Business

Issuesto Consider Regarding Selling My Business

Sellinga business is one of the most important events in the life of anyentrepreneur. Therefore, regardless of the situation, he/she shouldbe able to do it right (Rickertsen &amp Gunther, 2006). This isachieved through considering all aspects and concerns that areimportant regarding the sale of a business. Before moving on withmaking the sale, it would be important to consider and understand allthe steps involved in the process. This will help in setting goalsfor the business and incorporate future or post-sale plans in thenegotiations.


Thefirst concern is to presence competent legal and financial advice. Itis important to consider whether the legal counsel for the businesshas relevant experience in that area by consulting and interviewingother experienced firms. If the legal advisor is competent enough,then it would be important to get an estimation of the legal fees tobe involved in the transaction, to seek advice on the initialstructure, have a confidentiality agreement prepared and to seekguidance during the negotiation period on tax laws, contracttransfers and lease issues. It would also be important to seekfinancial advice from an investment banker. It is paramount tointerview several investment bankers to determine the most competentone. He/she would be important in giving information regarding marketvalues to help determine the price to sell and also in tidying up thebusiness to make it ready for sale.

Theother important issue is the pre-sale preparation of the business(Klueger, 2004). This involves looking at whether all the companybooks and records are correctly written and correcting any errorse.g. looking at the obsolete inventories and bad debts, minimizingcustomer concentration of the business, conducting businessevaluation and developing key employees. Aligning such factors willhelp make sure that the business is in the correct state during thesale. Additionally, it would be advisable to consider any limitationsof liability as a seller. This involves limiting my liabilitiesduring the sale e.g. making sure that breach of warranties andrepresentations made by the buyer in the transaction should limit myliability to him/her for the misrepresentations. Considering how thesale will affect employees would also be very important, such asdetermine how many employees are willing to stay after the sale, whatwill happen to key employees and informing employees about the sale.

Itis also necessary to consider financing issues. If I feel the need tofinance the transaction, this makes me a lender. Therefore, it wouldbe best to obtain personal guarantees and perfect security to act ascollateral. It is also best to obtain stock pledge agreement andensure that it is secure and also consider steps to take if the buyerdefaults such as tale back the business. Another major issue isconfidentiality. It would be necessary to identify whether there arecompetition concerns in the business. If there is, it would benecessary to use non-disclosure agreements to preserveconfidentiality and trade secrets of the business for a certainperiod and that the confidential information to be returned in caseof breakdown of negotiations. This will ensure that no information isdisclosed after the sale and that the buyer does not use theinformation for misconducts such as hiring my employees if sale doesnot happen.

Itwould also be imperative to consider how to value and market thebusiness. Valuing the business would involve seeking professionalassistance to determine price (Chalfin, 2006). Financial advisors andinvestment bankers will help in this step. It will also involveanalyzing what down-payments can be considered, whether finance thetransaction, what earn-outs to provide and whether the sale will havean escrow. There would be two options in marketing the businesseither market it myself or hire a broker. If the isn’t any existingpotential buyers, marketing the business myself would be through theinternet and referrals. In hiring a broker, it would be wise tointerview a few brokers to determine the most competent one and whois familiar to the business’s industry.


Affiliationto the buyer does not end completely after the sale. Therefore, it isadvisable to consider issues that may arise after the sale of thebusiness. The first issue is the tax implications of the sale. Thiswould involve considering the amount of capital gains to be taxed ongood and income tax to be taxed on sale of inventories, what is thevalue of shares and whether there is roll-over relief. This willinvolve talking to tax and legal advisors to determine my taxliability so as to help maximize the sales proceed gained. Adequateplanning of the structure of the sale will help ensure a better taxadvantage and avoid surprises.

Itwould be necessary to consider intellectual property issues. Securingall the intellectual rights of the business e.g. patents, copyrights,name and trademarks will help add value to the business. It is bestto discuss what intellectual rights are transferrable to be used bythe buyer after the sale. A further concern is whether the businesshas existing property lease. The buyer will have to obtain theapproval of the landlord if he or she intends to acquire any propertyleased by the business. The buyer may also need to purchasecontingent of the property. I would also consider who owns thesecurity deposit and whether there is any environmental liabilityrisk on the property.

Outstandingly,employees’ well-being after the sale is also a very importantpost-sale issue. It will be necessary to identify whether there willbe any anticipated employee lay-offs, whether key employees will berequired during transition and whether all the employees are subjectto non-compete issues. According to McDaniel (2013), to maximize thevalue of the sale, I would also put employee agreements before thesale. Consequently, I would be required to think about potentialliabilities that may arise due to these agreements such as payingemployees not retained by the purchaser. If the current and formeremployees of the business will be subject to confidentialityrequirements, I would consider whether there would arise anypost-closing confidentiality concerns and prepare the employees forsuch situations. To ensure long-term stability of the employees, itwould also be advisable for me to make some allowances so as tohinder any post-exit plans.

Itis also essential to consider what contractual obligation thebusiness has and consider which of them to pass to the buyer. Forinstance, the business may have mortgagor covenants which would bepassed to the buyer but lease covenants may not be passed but thebuyer may form new lease covenants with the landlord. Rather thanselling the premises of the business, it is necessary to considerwhether it would be more profitable to lease them. The final issue isto consider what will happen if the prospective buyer expressesinterest in having me run the business or help him/her after thesale. This may necessitate formation of separate employment contractwith the buyer.

Tosum up, after considering all the aforementioned issues, I wouldreduce them to writing in the form of a binding contract. This willhelp in to avoid any complications in the sale process (Klueger,2004). Having considered the mentioned concerns in relation to mybusiness and situation, legal and financial advisors will help medetermine the best course of action for my sale transaction.


Chalfin,R. J. (2006). SellingYour IT Business: Valuation, Finding the Right Buyer, and Negotiatingthe Deal.Hoboken: John Wiley &amp Sons

Klueger,R. F. (2004). Buyingand selling a business: a step-by-step guide.John Wiley &amp Sons.

McDaniel,T. (2013). Selling Your Business. In Knowand Grow the Value of Your Business(pp. 93-114). Apress.

Rickertsen,R., &amp Gunther, R. E. (2006). Sellyour business your way: Getting out, getting rich, and getting onwith your life.New York: American Management Association.