You may choose to leave your business for a variety of reasons—for instance, you might be ready to retire, or you might feel it's time to cash out and move on to a new project.
If so, then congratulations!
When it comes to selling your business, there is no wrong road…
Or perhaps your business failed to find an audience. Maybe you are ready to rejoin the workforce as an employee. Whatever the reason, you can’t afford to stumble through the Exit door. You need to make the most of your departure, whether that means selling your business to the highest bidder, or declaring bankruptcy.
Selling Out (It’s a Good Thing!)
Selling a business isn’t easy, but it’s always better than the alternative! Not surprisingly, many business owners choose the path of least resistance, which is often an outright sale. If you’re struggling to take your business to the next level, or if you’re ready to retire, then an outright sale can help you collect cash, clear debts, and liquidate your assets.
If you’re ready to cash out, then there are two ways you can go about it. First, you can market your business as a single “asset” to potential buyers. In this scenario, you sell your brand, your products, patents, contacts—everything. A buyer can elect to absorb your brand, or he can dismantle your business to try to turn a quick profit.
Second, you can sell off your assets individually. An asset buyer might be interested in a single piece of equipment, a brand name, or a piece of property.
Many entrepreneurs don’t like the idea of breaking down their business into discrete parts. After all, your business is your baby. However, by selling off your assets piecemeal, you retain a measure of “control”; nobody is going to run your brand into the ground, for instance. Piecemeal sales take time, but they often result in a greater net profit for the business owner.
When it comes to selling a business, there is no wrong road. The nature and health of your business, as well as your intentions as an owner, will determine the best course of action. Understanding all your options, and seeking guidance from experienced professionals, can make the process easier, and the transition smoother.
Minimizing Damage on Your Way Out
Like everything in life, going broke can be done poorly or it can be well, with dignity and integrity. Managing insolvency well allows you to exit with your reputation intact. If your business is failing, then you’re in a tough spot; don’t make it worse by acting rashly or making decisions that will haunt you in the years to come.
Consider the following step-by-step guide to bowing out without breaking down.
- Identify your legal and contractual obligations. Are there building or equipment leases to consider? Are there government contracts that must be fulfilled? Are there pending lawsuits or unpaid taxes, such as payroll taxes or sales taxes? Beware of any debts or obligations that threaten personal liability. Notify your clients, and negotiate to terminate any outstanding contracts.
- Identify key customers who will be personally or financially hurt by the closure, and try to find ways to minimize the disruption to their business.
- Contact an attorney and review any state or federal laws pertaining to the dissolution of your business. Find out whether or not you will need to go through a formal bankruptcy process in order to clear your debts.
- If you are able to pay off most of your outstanding debts, then sell off your remaining assets as quickly as possible.
- Be proactive about controlling the publicity surrounding your closure. Write up some key points that highlight your past successes, your reasons for closing, and any efforts you have made to protect your clients and contracts. If you are planning to open another business in the future, then it is essential that do everything you can to protect your reputation.
Do you have experience closing down a business? Share your story with us today, and publish a guest post on The Self-Employed Blog.