There are many reasons for you to end your business. However, reaching this point will require an important decision: should you sell or dissolve your business? It’s a difficult question to answer, as each option has pros and cons that would either greatly benefit or trouble you.
If you’re already in the precarious situation of ending your business and don’t know the right choice, this small guide will try to help you choose the best option. So, read on.
Dissolve If You Don’t Need the Money and Don’t Want the Headache
This is a cut-and-dry reason. Selling a business requires a lot of consideration. And if your business and initial valuation are too small, don’t sell. Just dissolve it and get it done with. Spending your energy on other things that could provide you with more money would be much better.
Remember: Don’t think that all businesses have value and that someone would buy or take over them. Most of the time, the owners of failing companies haven’t thought of how they would exit their businesses or career. Because of that, they push themselves to sell their business immediately, only to give them tons of headaches no one would dare to experience.
However, if you think you can sell and want your business’s value to be much better than what you initially thought, you may want to hire an experienced business broker. Such a business broker can help you know the best option for your company. They can also protect you from most of the cons in this article.
Also, don’t forget that you may need to prepare for your next business after closing down your current one. Dealing with buyers may not be an option for you at that time. But if you still wish to go through with selling your business while starting a new company, you may want to get help from business professionals like the ones from Swyft Filings.
Sell If You Have a Hungry Competitor
Your competitor is one of the key people to look for when you’re planning to end your business. After all, they’re most probably the ones who’ll get the most value out of your business. They’ll likely go after your current customers, key staff, products, and even branding. They may also use your company as leverage against the competitors in your service area and crush new startups planning to take over your territory.
Aside from knowing how valuable your business can be, your competitors may have strong banking relationships. It means that they may have the financial capacity to give in to your demands as long as they can get their hands on your company. Selling to them can give you a quick exit from your business.
However, selling your business to a competitor can be a bit risky—not to mention that you need to do many things beforehand. You might be familiar with the due diligence process—a period when the buyer can look closely at your business, product, or service. During this time, they can access your business without paying anything. This process can put your business practices, customer lists, and even top employees in the spotlight, and they may imitate, steal, and pirate to get the best out of your business without throwing any money your way.
Sell If You Have Capable Employees
You don’t have to look further if you’re searching for who might be interested in your company. If you have capable employees, consider handing them your business and set up a fair payment plan.
Be reminded that you may not get anything immediately after the sale. And it can be a bit risky. After all, they can mess it up for you, and you might not even get paid a single dollar.
Another thing that you should consider is the valuation of your company. As your employees have a better idea of how you run your business and how it operates compared to outsiders, they tend to undervalue your company.
You should also be ready for a potential insurrection of your employees if you suddenly decide to sell the company to a third company. Employees can quickly become disgruntled if you, as the previous owner, fail to keep the word you gave them. As a result, your employees may threaten your company’s operations to spite you, resulting in the third-party buyer pulling out of the deal.
Sell If You Found Someone Who Can Take The Business Off Your Hands
You should know that finding a buyer can take years. And once you do find one, discussion on the terms and price may take a while. Not to mention that they may fully take advantage of their due diligence period, which can further stretch the amount of time before you can finally let go of your business.
So, if you found someone outside your business who’s willing to take your business off your hands, consider selling. That person might be an ambitious client, a philanthropic investor, or an aggressive entrepreneur. Whatever the kind of person they may be, proceed cautiously.
Before selling your business, you need to get it in shape. Typically, you will have to prepare for at least a year before you sell as you need to improve your customer base and financial records to attract buyers.
After that, establish the reason why you’re selling. You might be bored, overworked, ill, or retiring. Those reasons are common and okay. However, if your reason is that the business isn’t profitable, your potential buyer may get scared.
After that, get a business appraiser. A business appraiser is there to determine the resale value of your business. With them, you can gauge if selling your business can still be a profitable venture for you.
Next, prepare the documents. Don’t just dilly dally. Ensure you have the essential documents to seal the deal when the buyer decides to buy and give you the money.
Conclusion
These are some of the considerations when deciding whether to sell or dissolve your company. Being in a situation where you need to let go of your company is too stressful for anyone to handle. And so, before you decide on anything, get professional help or try to be as cautious as possible with all the considerations mentioned above.
