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Disclose When Selling A Business

Disclose When Selling A Business

When the time comes to sell a business many company owners are baffled at how to start the process. While you should always consult with your attorneys and accountants when selling your business, this article will touch on some points to bear in mind when it comes to dealing with potential purchasers of your company.

Buyers expect full disclosure of business for sale
Buyers of small businesses do expect a seller to be forthright during the process and do require all information about the company to be presented to them at some point in the process. Using this is a guiding principle it would be prudent to organize a file of information that you believe will be useful to an investor. Try to anticipate what you would look for if you were buying a business. Although every investor is different, most will require financial statements, tax returns, equipment lists and so on.

The timing of information disclosure is important
Another key point to remember is that you should not distribute all of your business information to a prospective purchaser at the earliest time. All buyers must be qualified by a professional, either a business broker, lawyer or other professional. That being said, there is a sequential process that is usually followed. A business for sale is usually advertised with a teaser advertisement with general and limited business information, without the business identity being disclosed. Next, all buyer inquiries must be qualified. The typical qualification process entails screening people based on their aptitude, financial means and investment risk tolerance. A good business brokerage would dislose only a limited amount of business information to non-qualified inquiries.

Get a confidentiality agreement in place
Before the identity of the business or any sensitive business information about it is issued, you should have a buyer sign a binding non-disclosure agreement (NDA). An NDA should be reviewed by your attorney to ensure that it is stringent enough to protect you. It should also articulate your recourse should the confidentiality be broken. Even after an NDA is in place, be prudent with respect to what you distinguish and to whom.

Respect the due diligence process
Some inexperienced buyers of small businesses will demand that all business financial, customer, tax and operational data be disclosed prior to a conditional offer or letter of intent being in place. The reality is that a serious and motivated buyer should be prepared to submit a conditional offer with a condition that further information be vetted during due diligence.

Source by Steven Skrlac

mitchel turner
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