Selling a Business in Washington State
When selling a business in Washington State, there are some key aspects to keep in mind such as involving an experienced lawyer.3 min read
When selling a business in Washington State, there are some key aspects to keep in mind. You'll want to get an experienced lawyer involved to make sure that all of your bases are covered and you don't end up in a bad deal.
Basics of Selling a Business
First, you'll want to plan ahead so you're completely prepared for selling. This may mean that you discuss and plan the sale of your company one or two years before you plan to take action. Planning ahead is ideal because you'll likely need to adjust some aspects of your company before it's ready to sell. You'll also want to make sure that your documentation is clear and well-kept so that it can be easily handed over to a buyer.
As you plan to sell your business, ask yourself and fellow business owners these basic questions:
- Why do we want to sell?
- Why should we sell?
- Why should anyone want to buy our company?
- When is the right time for the sale?
Requirements For Selling a Business
Once you find a buyer for your business, they'll need a minimum of three years of your past financial documentation. This includes your company's tax returns and an up-to-date balance sheet. You'll also need to provide the last year's worth of financial statements, each month included. This will show the buyer any fluctuations throughout the year due to seasons or other factors.
All company assets that are for sale should be clearly listed and their supportable or current book values should be included. You might also need to include details like:
- Business licenses and permits.
- Vendor contracts.
- Lists of suppliers.
- Marketing materials.
It can be very difficult to properly value your own company as you have a personal investment in it. Getting a professional valuation will help you clearly see what your business is worth, even if it is a small business. This will help you find a suitable asking price so you can be in a good range to find buyers. A professional valuation will also make it clear if there are parts of the business that need improvement before selling.
Valuation for a business takes the following into consideration:
- Asset values.
- Discretionary cash flow.
Be Ready for a Sale
When planning to sell your business, you'll also want to develop a marketing strategy. You'll need a marketing package and action plan. Decide whether you're okay with negotiating with buyers. If you determine that you won't do well with negotiating because of an emotional attachment to the company, you might want to consider using a broker or agent to handle the sale.
Make sure you're ready to show your business to potential buyers at any time. Think of it like trying to sell your home. You'll have showings and need to be ready to make a sale anytime someone is interested.
An advisory team is also a great asset to a business sale. This will include experts like your lawyer, broker or agent, banker, accountant, and SBDC (Small Business Development Center) advisor.
What to Do Once You Find a Potential Buyer
Before offering all of your business information up to any potential buyer, you'll want to first interview the buyer and make sure they are legitimately interested in purchasing your company. Even if they are actually interested, they may not have the necessary skills to run the company, so you'll want to get some of their information and background to determine if they're capable.
You can form an offer agreement with the buyer. You'll agree to share your business's financial information in exchange for the following:
- Buyer resume.
- Nondisclosure agreement (or confidentiality agreement).
- Personal financial statement.
Taking such care in the case of a business sale can help prevent your competitors from getting ahold of your business's financial information. You don't want that kind of information easily accessible to anyone.
Consider whether you'll want to remain a part of the company after the purchase. Will you be available to help the buyer and train them to handle the ins and outs of the business? Think about and plan how the transition period will play out.
If you need help with selling a business in Washington state, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.