Part 2 – How to sell your business? 4 Things to consider
2 May 2017

– Summary

Do you want to sell your business? If your answer is "yes", you will find this second part of our article on selling your business helpful.

As an owner of a business, you may eventually want to sell your business.  You may be approached by a potential buyer or actively look for a buyer yourself.  Depending on the kind of business entity (i.e. private company; public company; personal liability company; partnership; sole proprietor) there may be certain requirements that need to be met, after finding a buyer but before being able to lawfully sell your interest.

There could be several reasons a business owner might wish to sell an interest in their business; often it is to raise capital for the operations of the business (where only part of the business is sold) or where the intention is to cash-in completely.

The second part of our 2 part series deals with:

Click here for part 1.

For this article we are going to focus on private companies; to sell your business is usually complicated and you may encounter many pitfalls so it is best to approach any sale in an unemotional and thorough manner.

Accounting

One of the most important factors in evaluating and selling a business are accounting records.

 

They form an integral part of the due diligence process.

Knowledge of the financials of a company allows a potential buyer to determine his interest in the business.

Therefore, besides any statutory requirements, it is useful to keep your account records up-to-date and in order.

Intellectual Property

Having your intellectual property (such as trademarks and patents) registered can add value to your business as these registrations can provide certainty and exclusivity which may be attractive to potential buyers.

 

Of course, registering intellectual property is not a simple exercise and often requires the expert guidance of an attorney.  As a result, it can be expensive to acquire your registered intellectual property.

If you intend utilising your intellectual property as an incentive for a potential buyer, you should ensure that your registrations are in order as early as possible.

Valuation

The sale price of a business is influenced by many factors, most often the current and future potential of the business.

 

Depending on the business and the potential buyer, you may want to consider using a professional (usually an accountant) to determine the value of your business.  These professionals will often provide documentation supporting their evaluation which is helpful to a potential buyer and which documents can be utilised during any due diligence.

Duration

It is unusual for the sale of a business to happen quickly unless the potential buyer already has suitable knowledge of the operations of the business.

 

Negotiations and due diligence can take time, and it is not unusual for discussions to fail after long negotiations.

As with any negotiation, strength is often found in your need or lack thereof.  If you need to sell your business fast, and buyers are interested, you may need to be willing to lower your ideal sale price.  The reverse is also true; where the buyer is has a strong need to own your business, you may be able to push your sale price up.

Get a Shareholders Agreement now

Use iLawyer.co.za to make a Shareholders Agreement document today.  iLawyer.co.za is an online automatic Legal Document builder that allows you to make quality legal documents in minutes at low prices.

If you have a company or if you are starting a company you should have a Shareholders Agreement.

DISCLAIMER: THERE ARE MORE CONSIDERATIONS THAN WE CAN COVER IN THIS ARTICLE SO ONLY USE THIS INFORMATION AS A GUIDE.   THIS INFORMATION DOES NOT CONSTITUTE LEGAL ADVICE.  IT IS ALWAYS BEST TO DISCUSS YOUR SITUATION WITH AN ATTORNEY; CONTACT US AT 0861 88 88 35helpdesk@gcm-legal.com AND THROUGH THE CONTACT FORM ON THIS PAGE.

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