Expert Panel®Jul 24, 2023,
Ensuring a smooth and secure transition is crucial during the selling process. Safeguarding yourself against potential pitfalls can make all the difference in protecting your interests and assets.
Below, 15 Forbes Finance Council members explore several effective ways to protect yourself while navigating the intricacies of selling off your business to a new proprietor. Whether you’re a first-time seller or an experienced entrepreneur, these insights will help you navigate the process with confidence and safeguard your interests.
1. Seek Guidance
Don’t navigate this journey alone. It’s critical to enlist the support of experts. Whether it’s hiring an attorney to tailor the agreement to your interests or engaging a tax expert to understand your company’s true value in the current market, seek professional advice before you decide to sell your business and surround yourself with advisors that will protect your rights throughout the process. – Puai Wichman, Ora Partners
2. Make Your Outcomes Known
Selling business assets is never something you should DIY. Remember, you don’t know what you don’t know, and no one will protect your interests like a qualified attorney with experience in the industry. Be clear with your prospective buyer and with your attorney about what your desired outcomes are. Don’t be afraid to walk away if it’s not the right time or place. – Julie DeLong, Backyard Bookkeeper
3. Establish Legal Agreements
When selling a business product or service you must have a comprehensive legal agreement in place. This agreement should clearly outline the terms of the sale, including warranties, liabilities and any post-sale obligations. Conduct thorough due diligence on the potential buyer, ensuring their financial stability and reputation fits your end goals. Don’t just sell for the sake of selling. – Greg Cucino, Roundtable Strategy Advisors
4. Specify Objectives
Clearly define your primary objective such as maximizing financials or bringing on a like-minded growth partner. Mergers and acquisitions can often become murky when the primary objective is clouded throughout the due diligence process. Make sure you’re clear on exactly what you want and don’t be afraid to make that a priority during the process. It will keep you grounded. – Drew Gurley, Redbird Advisors
5. Utilize Insurance
15 Options For Ensuring Safety In Business Transfers
Expert Panel®Jul 24, 2023,
Ensuring a smooth and secure transition is crucial during the selling process. Safeguarding yourself against potential pitfalls can make all the difference in protecting your interests and assets.
Below, 15 Forbes Finance Council members explore several effective ways to protect yourself while navigating the intricacies of selling off your business to a new proprietor. Whether you’re a first-time seller or an experienced entrepreneur, these insights will help you navigate the process with confidence and safeguard your interests.
1. Seek Guidance
Don’t navigate this journey alone. It’s critical to enlist the support of experts. Whether it’s hiring an attorney to tailor the agreement to your interests or engaging a tax expert to understand your company’s true value in the current market, seek professional advice before you decide to sell your business and surround yourself with advisors that will protect your rights throughout the process. – Puai Wichman, Ora Partners
2. Make Your Outcomes Known
Selling business assets is never something you should DIY. Remember, you don’t know what you don’t know, and no one will protect your interests like a qualified attorney with experience in the industry. Be clear with your prospective buyer and with your attorney about what your desired outcomes are. Don’t be afraid to walk away if it’s not the right time or place. – Julie DeLong, Backyard Bookkeeper
3. Establish Legal Agreements
When selling a business product or service you must have a comprehensive legal agreement in place. This agreement should clearly outline the terms of the sale, including warranties, liabilities and any post-sale obligations. Conduct thorough due diligence on the potential buyer, ensuring their financial stability and reputation fits your end goals. Don’t just sell for the sake of selling. – Greg Cucino, Roundtable Strategy Advisors
4. Specify Objectives
Clearly define your primary objective such as maximizing financials or bringing on a like-minded growth partner. Mergers and acquisitions can often become murky when the primary objective is clouded throughout the due diligence process. Make sure you’re clear on exactly what you want and don’t be afraid to make that a priority during the process. It will keep you grounded. – Drew Gurley, Redbird Advisors
5. Utilize Insurance
There are many ways to safeguard your company depending on the deal structure. One common tool many business owners implement is a buy-sell insurance policy to protect the owner and sell the business in case of death during the duration of the sale of the business. – Letitia Berbaum, The Zandbergen Group
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Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
6. Secure Assets
The best strategy to keep your assets safe after you sell a business is to create a Cook Islands Asset Protection Trust and then open a Swiss bank account under that trust, as many times the new owner will mismanage the business and then attempt to undo the transaction through a lawsuit. This structure provides the most secure asset protection jurisdiction and the safest banking system. – Blake Harris, Blake Harris Law
7. Employ Opportunities
When selling off your business product or service to a new owner, it’s essential to safeguard yourself and protect your interests throughout the process. A few effective ways to do this is by incorporating a non-disclosure agreement, non-compete clause, clear intellectual property ownership, indemnification clause, earnout provisions and professional assistance into your sale agreement. – Bilal Surahyo, Simpli Home
8. Avoid Financing
Don’t sell finance, especially if you are leaving the business or taking a diminished role. You can’t assume that the business will run as well as it did when you ran it, and the only way for your note to be repaid is if the business does well. Make sure that you get enough cash to satisfy your needs so the note is merely a kicker. Selling your baby for a note payment is not a good strategy. – Chris Tierney, Moore Colson CPAs and Advisors
9. Structure Transactions
Structure the deal as a stock sale, not an asset sale so the buyer takes on both the liabilities of the business and its assets, protecting the seller. Work with an attorney specializing in corporate transactions and familiar with your industry to help safeguard the structure and ensure reasonable earnout targets with no surprises. View this expense as an investment and hire someone you can trust. – John Abusaid, Halbert Hargrove
10. Support Transition
Maintain a transition period and provide post-sale support. This allows you to provide training and ensure a smooth handover of operations. By offering assistance during the transition, you can help the new owner understand the intricacies of your product and customer base. This reduces the risk of misunderstandings or disruption in service, ultimately ensuring a successful transfer. – Jose Rodriguez, Got Credit?
11. Be Diligent
When divesting your business, it is essential to ensure your protection by engaging in meticulous due diligence regarding the prospective buyer. Be meticulous when scrutinizing their financial stability, reputation and past performance. By exercising caution and seeking counsel from seasoned advisors, you can facilitate a seamless transition while minimizing potential hazards. – Jeffrey Bartel, Hamptons Group, LLC
12. Consider Consequences
Your business is your life and your “plan” never had it any other way. Sales strategies focus on finances and agreements while ignoring important personal questions. How could a sale impact your family’s situation and long-term aspirations? What emotions could be triggered, impacting both personal and professional relationships? Have you considered new product or service opportunities? – Brian Lasher, CIG Capital Advisors
13. Perform Analysis
Execute proper due diligence regarding recent comparable company transactions. This will help you discover an appropriate “buyout multiple” on your earnings or revenues, arming you with data to support sale price negotiations. Industry-specific mergers and acquisition research can be an inexpensive tool to start. Consultants and bankers can also provide a more comprehensive analysis of your business. – Luke Andriuk, Saugatuck Financial
14. Obtain Rights
The first thing you must do is hire a lawyer, and ensure ownership and usage rights are clearly outlined in the sales agreement. You need to make sure you’re protecting your intellectual property, including proprietary technology, trademarks and other valuable assets. You can also mitigate the risk of misuse and exploitation by adding non-disclosure agreements and non-compete clauses. – Nick Chandi, ForwardAI
15. Remain Transparent
Be completely transparent. Most new business owners are excited to flex their entrepreneurial muscles. However, after a year or so, they see all the warts they might have overlooked in due diligence. If you’ve been completely transparent, they will have no reasonable basis to engage in any backlash against you. It’s the secrets that cause problems. – Todd Sixt, Strait & Sound Wealth Management LLC
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
6. Secure Assets
The best strategy to keep your assets safe after you sell a business is to create a Cook Islands Asset Protection Trust and then open a Swiss bank account under that trust, as many times the new owner will mismanage the business and then attempt to undo the transaction through a lawsuit. This structure provides the most secure asset protection jurisdiction and the safest banking system. – Blake Harris, Blake Harris Law
7. Employ Opportunities
When selling off your business product or service to a new owner, it’s essential to safeguard yourself and protect your interests throughout the process. A few effective ways to do this is by incorporating a non-disclosure agreement, non-compete clause, clear intellectual property ownership, indemnification clause, earnout provisions and professional assistance into your sale agreement. – Bilal Surahyo, Simpli Home
8. Avoid Financing
Don’t sell finance, especially if you are leaving the business or taking a diminished role. You can’t assume that the business will run as well as it did when you ran it, and the only way for your note to be repaid is if the business does well. Make sure that you get enough cash to satisfy your needs so the note is merely a kicker. Selling your baby for a note payment is not a good strategy. – Chris Tierney, Moore Colson CPAs and Advisors
9. Structure Transactions
Structure the deal as a stock sale, not an asset sale so the buyer takes on both the liabilities of the business and its assets, protecting the seller. Work with an attorney specializing in corporate transactions and familiar with your industry to help safeguard the structure and ensure reasonable earnout targets with no surprises. View this expense as an investment and hire someone you can trust. – John Abusaid, Halbert Hargrove
10. Support Transition
Maintain a transition period and provide post-sale support. This allows you to provide training and ensure a smooth handover of operations. By offering assistance during the transition, you can help the new owner understand the intricacies of your product and customer base. This reduces the risk of misunderstandings or disruption in service, ultimately ensuring a successful transfer. – Jose Rodriguez, Got Credit?
11. Be Diligent
When divesting your business, it is essential to ensure your protection by engaging in meticulous due diligence regarding the prospective buyer. Be meticulous when scrutinizing their financial stability, reputation and past performance. By exercising caution and seeking counsel from seasoned advisors, you can facilitate a seamless transition while minimizing potential hazards. – Jeffrey Bartel, Hamptons Group, LLC
12. Consider Consequences
Your business is your life and your “plan” never had it any other way. Sales strategies focus on finances and agreements while ignoring important personal questions. How could a sale impact your family’s situation and long-term aspirations? What emotions could be triggered, impacting both personal and professional relationships? Have you considered new product or service opportunities? – Brian Lasher, CIG Capital Advisors
13. Perform Analysis
Execute proper due diligence regarding recent comparable company transactions. This will help you discover an appropriate “buyout multiple” on your earnings or revenues, arming you with data to support sale price negotiations. Industry-specific mergers and acquisition research can be an inexpensive tool to start. Consultants and bankers can also provide a more comprehensive analysis of your business. – Luke Andriuk, Saugatuck Financial
14. Obtain Rights
The first thing you must do is hire a lawyer, and ensure ownership and usage rights are clearly outlined in the sales agreement. You need to make sure you’re protecting your intellectual property, including proprietary technology, trademarks and other valuable assets. You can also mitigate the risk of misuse and exploitation by adding non-disclosure agreements and non-compete clauses. – Nick Chandi, ForwardAI
15. Remain Transparent
Be completely transparent. Most new business owners are excited to flex their entrepreneurial muscles. However, after a year or so, they see all the warts they might have overlooked in due diligence. If you’ve been completely transparent, they will have no reasonable basis to engage in any backlash against you. It’s the secrets that cause problems. – Todd Sixt, Strait & Sound Wealth Management LLC