Timing is everything – including selling your business
With Thanksgiving, Black Friday, Cyber Monday now behind us and the cooler weather including rain for those of us that live in California, its time to slow down and enjoy the upcoming Holiday Season! Happy Holidays to you and yours?
For those of us that own a business, how was your 2019?
Because I do many business valuations each year, I can see the California economy is strong. This is despite tariffs, currency fluctuations and new laws that don’t seem business-friendly (though we learn to adapt.)
What is supposed to normally be a negative as it discourages investment, is the constant noise of what seems a never-ending drone of political chatter about the current state of politics is that “we haven’t seen that before.”
And don’t forget the perennial noise; businesses and people are moving out of California because it’s too expensive.
Is selling your business part of your plan for 2020?
As you look back on your 2019 and ahead to 2020, perhaps selling your business is part of your plan.
After all, consider some of the risks?
- A downturn in the economy
- The loss of a key employee
- A new competitor
- A new technology that may be disruptive
- More changes in regulations
- Interest rates finally going up
- Costs for labor, rent and other core business expenses going up
- An equipment breakdown and/or large capital expense requirement
- Demographic changes
Other reasons to sell your business in 2020?
The previous risks were all external risks and don’t consider the owner.
If you are the owner of your business, perhaps you are wrestling with:
- Your passion to do it all again in 2020.
- Your energy and enthusiasm,
- A health scare or accident that you didn’t expect
- An unexpected family need that requires more time than you expect.
As they say, life happens.
What if you plan to sell your business in 2020?
The best time to value and sell a business is when two factors come together.
- The first factor is when the market or economy is ready.
- The second factor is when you, as the owner of your business are ready to sell.
The first factor you have no control over. The second factor you may not have any control over but if your head and heart are saying its time; then its time. That’s as complicated as it is.
Most business owners wait too long to start thinking about the transition, and as a result, they end up selling their life-long effort for less than they could have if they had planned things earlier.
What do you need to sell your business in 2020?
If you are thinking it may be time to sell your business in 2020, it helps to start the process in late 2019 rather than leave it to later.
Here are some suggestions and why.
- Bring your financial statements up to date so you have a clear tax picture for 2019. The number one reason a business doesn’t sell is that the financial statements aren’t accurate. Prepare for this now.
- Report all your income. Not only do you want accurate financial statements you also want to show the full financial performance of your business. I see so many business owners put cash sales in their pockets to pay less tax, but this action reduces the amount they will receive from the sale of their business.
- Get a business valuation so you understand the value of your business. A business valuation is not only critical to the seller but the valuation I put together for a business owner can be used to share with a third-party lender so they can decide if they would consider approving a loan to a qualified buyer. Click this link if you would like to see a sample business valuation of what I can put together for you.
What are the steps to sell my business?
There are many steps to selling a business. It’s not a quick nor simple process especially if your business is in California.
California escrow process
One of the reasons selling a business in California is different is because we use an escrow process.
A lot of states in the US have an attorney or solicitor handle the closing process.
California licenses escrow companies to do this because they not only handle the money as a neutral third party.
Other services of a California escrow company include but is not limited to:
- The bulk sale process to ensure inventory transitions to the buyer free and clear of all encumbrances.
- Clearances from the different California agencies including the Employment Development Department (EDD) and California Department of Tax and Fee Administration (CDTFA).
- Assistance with any special license or clearances for California agencies such as the ABC for a Liquor License, Bureau of Auto Repair, Contractors State License Board and more.
- Assistance with the Purchase Price Allocation negotiation
Many Steps to Sell a Business
There are many steps to sell a business. The primary steps are:
- Plan for selling
- Activate a plan to search for a buyer
- Negotiate a deal with a qualified and motivated buyer
- Close the sale
That sounds simple enough but there are many steps within each primary step. In total, I’ve worked out there are a total of 24 steps before the owner of a business can close the sale.
Please click this link if you would like a summary of The Many Steps To Sell A Business.
What is the value of my business?
Are you wondering about the value of your business? If so, let me put an 18-page report together for you. In order to prepare a valuation of your business, I need the last 3 years’ tax returns, a current profit, and loss statement and a recent balance sheet.
Above all – enjoy the season.
As 2019 comes to a close, my hope for you that it has been a successful year. Successful not only from a business perspective but more importantly, a personal perspective. Life is short and precious. Embrace it with all the courage and energy you can muster and best wishes for a successful 2020.