Top 5 Things to Consider Before Selling Your Company
If you've grown your business into a financial success and are ready to slow down and reap the benefits of all those years of work, you may be considering selling your company. It's a great position to be in, but you certainly shouldn't enter the process blind. You've reached this point by carefully analyzing every move, pushing forward with prudence and strict planning, and you should do the same when considering a sale. Here are five things to keep in mind before moving forward on a sale of your company.
First off, what is going to happen to all of your employees? Most companies that are sold have a hundred or more full-time workers, many of whom have been there for years. What sort of employee retention will there be? A company's greatest asset is its people, and the more employees that stay on with the company, the better the chances it will continue to be successful after the sale. You'll probably also feel better about the big windfall you'll receive if it doesn't mean all those people lose their jobs. Make sure you are clear with any prospective buyer about what you expect for your employees, to be sure you are on the same page for as long as you have a say in the matter.
Next, consider how the relationships with outside vendors will be handled. You've spent years building up those associations, and you probably want to make sure they stay in place. Chances are your company receives all sorts of discounts or improved credit terms because you've been working with the same outside vendors for quite a while, and if the new ownership goes in another direction, your company could falter. You're selling for a number of reasons, but you certainly don't want to see all your hard work toppled. On top of that, the relationships you have in place actually bring a dollar value along with them. Make sure that value is considered when setting the purchase price of your company.
Also keep in mind that you'll probably be required to sign some sort of non-compete agreement at the time of the sale. You've proven yourself to be an expert in this field, so the buyer will want to know that they won't find themselves competing with you immediately after the purchase. Consider whether you're willing to step out of the industry, or if you're interested in building something new from scratch. Regardless, you can negotiate all of the terms in the non-compete. Make sure you keep it very specific, and that you're comfortable moving ahead with that document included.
You should also consider whether you want some sort of consulting agreement involved in the deal. In fact, buyers will often request that you stay on as a consultant during a transitional period, to smooth out the process and insure that the business success continues. Consider how long you are willing to do this kind of work, and what sort of compensation you would want for it.
Finally, think about how all of the intangible assets will be accounted. As the business owner, you've built a whole host of resources that don't show in the financial ledger. That includes lists of customers, the company name and brand visibility, goodwill with consumers, and any websites your company owns. The Old Park Lane Capital CEO didn't consider some of these, and paid for it. Make sure that these intangible assets are included in the purchase price, and that you've discussed how to determine their value with professional business transaction lawyers and accountants.