Selling Your Business? Here Are Some Pitfalls to Avoid
Selling your business can be a very stressful time in your life. Odds are that you have spent a good chunk of your recent life working your business. And it means a great deal to you. Unfortunately, buyers really don’t care about our emotional attachments to our businesses. It sounds harsh, but knowing what to expect can take the sting out of the process.
What a buyer is going to look at is how much income has been consistently generated out of your business. This needs to be reported income that appears on the books to be considered. Cash that hasn’t made it into the till can’t count as income. Few buyers will look at the potential of business. They want to know that your business is actually making a profit. Sometimes, smaller businesses that handle cash have a tendency for some of the cash not to end up as reported income. Unfortunately this can hurt you in the long run if you are considering selling your business.
Another thing that needs to be considered is a list of chattels and fixtures which may be included with the sale of the business. This can include both owned and leased items. Anything that is leased needs to be clearly defined on this list and the monthly payments, remaining term of lease and any conditions need to be disclosed.
More often than not, financial statements will be required by a potential buyer. These would be part of a package prepared by your accountant on an annual basis. Whether your business is incorporated or you run your business as a sole proprietorship you will have been reporting income and expenses to the tax man. These documents will form an important component of any potential purchase and sale agreement.
Selling your business can be an emotional roller coaster ride. Remember that you need to show your business’s performance in the best possible light so insure your financials are up to date and showing the best income position possible.
If you are looking for assistance, please feel free to reach out and we will be happy to answer your questions to the best of our abilities.