How and When to Sell a Business

Nashua small business owner asks how and when to start planning to sell their business?

New Hampshire has a small business oriented economy.  Many owners of established, successful New Hampshire small businesses are baby boomers contemplating retirement.  A major part of their retirement funding strategy is a successful exit from their business. The sale of a business to a third party is one form of exit strategy.

Selling a business is a process.  The planning and implementation of the third party sale can take several years to complete.  This article will cover how to start the process and what questions to consider.

Why are you selling and what do you want out of the sale?  All cash with a full exit?  Are you willing/able to finance all or a part of the purchase price?  Will you play a role in the business after the sale?  Do you require a certain amount in order to make the exit?

Knowing your priorities ahead of time and the relative importance of each priority will smooth the process going forward. 

The most important factors related to the sale price and value of the business will be driven by financial performance and the future earning potential and cash flow of the business.  There are other steps to take which will enhance both your business and the likelihood of having a smooth sale process.  The key to a smooth sale is to avoid delays and future expense now, rather than when the transaction is ongoing.  Here are some steps you can take now.

• Make sure your corporate and other records are filed/updated and that all transactions are clearly documented. 
• Examine your significant contracts (including real estate leases and management agreements, if any).  Determine whether any terms and conditions will expire or require negotiation for a potential new owner of your business.
• Determine whether significant contracts and equipment/real estate leases may be assumed by a buyer.
• Meet with your lawyers and accountants to ensure proper corporate governance and tax planning.  Review your corporate book, if applicable.
• Make sure you have a written agreement among shareholders/partners/members in place to avoid disputes that could side track a potential sale.
• Verify that your intellectual property is protected and that you have proper agreements in place with your employees and contractors.
• Have your financial statements reviewed (and in some cases audited) to lend credibility to the financial results.
• Ensure that you are in compliance with all laws and regulations affecting your business.

Keeping on top of these items will make the sale process much easier and less stressful.  Take action now and you will improve your chances for a successful exit.

For more information on real estate, business transactions or general business planning and purchase and sale matters please contact the attorneys at Welts, White & Fontaine PC.  Please contact us by clicking here or by calling (603) 883-0797. Welts, White & Fontaine is one of Nashua’s largest, multi-practice law firms and serves the legal needs of both individuals and businesses in towns such as Amherst, Milford, Hudson, Brookline, Windham, Hollis, Merrimack, Concord, Manchester, Litchfield, Bedford, Londonderry, Pelham, and, of course, Nashua.

Author: John S. Polgrean, Esq.

This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal opinion.