A 5-Step Plan so YOU can Take Action
That’s it! After thinking about it for a long time, you are ready to begin the transfer of your business. You plan to complete this process over the next two years. But you don’t know where to start. Here is an itinerary to maximize your chances of success.
1. Know WHY you are Selling
It pays to take the time to write down the reasons for your decision to sell. This exercise will help you identify your real needs and goals. The sooner you clarify them, the better your chances of meeting your needs and achieving your goals.
Be careful, this exercise is more difficult than it seems. You often have to probe your emotions, which can be difficult. It is sometimes useful to hire the services of an adviser who can help you go beyond appearances with judicious questions.
2. Prepare an information overview of your company
Taking stock of your business life allows you to answer the question “What am I selling? ” It is also a way of identifying the growth potential of the business, which will help to determine its value.
To prepare such an overview, you have to put yourself in the shoes of a potential buyer. What questions will they ask? What will be their concerns? Who is likely to stir up their interest in acquiring the business?
A good information overview should include the history of the company, both at the commercial level and at the corporate level. It describes the main assets, the state of goodwill, relationships with suppliers, etc.
In short, this history provides a bird`s-eye view of the commercial and legal situation of the company. For this, it is necessary to make a complete review of the contracts in force, of the company minute book, of the financial statements, all with particular attention notes the reader will need to know.
The preparation of this document makes it possible to identify potential problems and, if necessary, to find solutions to them before the sale. It is necessary to make an appraisal without complacency of the weak points, such as current or potential litigations, and to prepare an appropriate argumentation. Lying to yourself will not serve your interests, nor the company’s interests in the long-run.
The information overview should be designed as a working tool for the seller, a sort of reminder. In some cases, it may be disclosed to the prospective purchaser, but only after the latter has entered into a non-disclosure and non-compete agreement.
3. Evaluate the business
Sooner or later, the company’s selling price will have to be discussed. The transferor should therefore establish early on, the price range that can reasonably be expected. There are several methods to achieve this, and the use of these methods can generate certain costs. However, these are justified by the gains in time and efficiency of possible negotiations.
4. Prepare for negotiation
Whether the business is transferred to family members, members of the management team or third parties, the terms of the transfer may need to be negotiated. For most entrepreneurs, the business is their main asset. It is therefore essential that the transaction takes place on terms that meet the needs and achieve the objectives of the transferor.
All negotiation consists in determining and responding to the emotional motivations of the parties. A good negotiation should save you from having to simply split the difference between the initial offers on either side.
A negotiation plan must therefore be put in place. This plan constitutes an evolving tool, capable of adapting to circumstances as they are transformed, without, however, losing sight of the desired result. By using professional negotiators, you will be putting the odds in your favour.
5. Surround yourself with good advisers
As a transferor, you should seek the support of advisers who can complete the business transfer process. The business transfer is an operation involving many aspects of legal order. Your choice should therefore be directed primarily to lawyers specializing in business law. In addition, by using the services of professionals with a certification in business transfer awarded by the Center de transfert d’Entreprise du Quebec (CTEQ), you further increase your chances of success.