To sell a business in Dallas, determine the right time to sell, get your business affairs in order, get a business valuation, and get in touch with a business broker.
There are many good reasons to sell your business: to cash out, escape the daily grind, gain the freedom to pursue other interests, etc.
However, selling a business is not a walk in the park. Many business owners are known to make wrong moves that cost them dearly when selling their businesses. Some sell for less than the business is worth, sell to bad buyers that destroy their legacy, etc.
After laboring to build your business, it would be a shame to be dealt a blow when selling it. Thus, business owners should know how to sell a business.
This article will tell you what you need to know about selling your business in Dallas, TX.
Specifically, this discussion will cover the following:
- Steps to selling your business in Dallas
- What records and documents do you need to sell your business in Dallas?
- How long does it take to sell a business in Dallas?
- Business issues you should consider when selling a business in Dallas
4 Steps to Selling Your Business in Dallas
Whether your Dallas business is a small business or an established brand, there are specific steps to ensure you get the highest yield when selling it.
1. Decide if it’s really the best time to sell your business
Getting the best value for your Dallas business is all about timing. There’s a right time to sell and a wrong time to sell. So, ensure you’re selling at the right time.
For example, you’ll get the best sales price for your business when it is most profitable. So, the best time to sell is when your business is at its peak.
It is also common to sell a business when it is trending up. This is because potential buyers recognize that such businesses have promising futures.
So, when deciding to sell your Dallas business, evaluate its health, and determine that it’s ripe enough to fetch you maximum value.
Note that, sometimes, exiting an ailing business is a smart business decision. However, getting the timing right is also essential because the more the business bleeds, the more it losses its value.
2. Get Your Business In Order
After determining the right time to sell, the next thing is to get your affairs in order and present the business in the best possible light. Some ways to do this include:
- Understand the true profitability of your business. Many businesses claim some expenses that should be excluded from a buyer’s recurring cash flow. To prepare your business for a sale, cut off non-mission critical expenses.
- Get your books in order. Ensure your financial statements are well-kept.
- Organize all legal paperwork. Arrange all other documents relevant to running the business, such as incorporation papers, licensing papers, leases, vendor contracts, etc.
- Ensure smooth operations. Manage your business effectively, ensuring that business performance does not decline.
- Create a growth plan. Since a business that is stale or on a downward spin will attract low offers, show that your business has opportunities ahead of it.
3. Find Out How Much Your Dallas Business is Worth
When you know how much your business is worth, you’ll be guided when setting a price.
Finding out how much your business is worth ensures you do not overprice yourself out of a deal. Know that potential buyers will do their own valuation so they do not overpay.
Knowing your business worth also ensures you do not underprice yourself and end up getting below what you are due.
So, a critical step in the process of selling your Dallas business is to do an objective evaluation of its worth based on current market trends. Emotions tend to color self-evaluations. Therefore, the best practice is to hire an accredited valuation appraiser.
4. Get In Touch With A Business Broker
A business broker can help you get the best price (by helping you get your business affairs in order, maximize the number of potential buyers, optimize selling terms, etc.).
Business brokers are trained professionals that help entrepreneurs navigate business sales. If you want to achieve the highest return on investment or avoid issues arising from selling, you need the expertise of a business broker.
There are many considerations when selling a business, and using a business broker helps you tick off many of them. For example:
You need to get your business affairs in order: Brokers understand what buyers are looking for in a business. So, a business broker can help you identify and make improvements that increase the value of your business. They can also help you create an executive summary that presents your Dallas business in the best possible light.
You need to maximize the number of potential buyers: More interests increase the likelihood of finding the right buyer and getting a better deal. Business brokers have the resources to reach thousands of potential buyers while keeping the business sale confidential. Sigma Mergers and Acquisitions has a database of over 9,000 active business buyers who have been painstakingly vetted.
You need to optimize selling terms: Sellers often have more than the sales price to consider. For example, what part of the price will be cash, would you want to remain in some capacity, would you like your legacy protected somehow, etc.? A broker can help you get the best terms, including more cash, consulting agreement, etc.
You need to be compliant during business sales: Brokers know all the documents that are important in the sales process. So, they can help you prepare these, ensuring compliance with relevant laws and regulations.
What Records and Documents Do You Need to Sell Your Business in Dallas?
When selling your business in Dallas, Texas, you need to organize corporate governance, financial, and administrative paperwork. These include:
- Certificate of account status (or certificate of good standing). It is issued by the state of Texas to show that your business is compliant with state regulations.
- Business Tax Returns. While the certificate of account status shows that you are compliant regarding fillings, buyers would also want to see your annual income tax filings for the past 2 – 3 years.
- Financials. You should prepare your profit and loss statements for the current and past 2 – 3 years, cash flow statement, and current balance sheet. Buyers need these documents to determine if the business has been profitable and has great cash flow and equity.
- Business contracts. These include your insurance policies, current lease, vendor contracts, customer agreements, employment agreements, etc.
- Confidential Information Memorandum (CIM). It is a professional summary of your business that you provide the buyer. It summarizes your financial position, industry layout, ownership history, business model, etc.
- Non-Disclosure Agreement (NDA). Since potential buyers may review confidential information, it is important you get them to sign an NDA beforehand.
- Offer to purchase agreement. At the tail-end of the sale process, you and the buyer should sign an offer to purchase agreement to signify the intention to move forward with the sale.
How Long Does it Take to Sell a Business in Dallas?
How long it takes to sell a business in Dallas depends on different factors. However, from the day of listing to completing the sale, most sales take 6 – 9 months.
The factors affecting how long it takes to sell a business in Dallas (and northeast Texas generally) include:
- The purchase price. The higher your price, the fewer your qualified buyers, and the longer it may take to sell.
- How long it takes for buyers to respond. The longer it takes buyers to respond, the longer it will take to sell.
- The buyer. Some buyers need longer due diligence, making your sale take longer.
- The type of your business. The type of business you are selling determines how marketable it is. For example, businesses with recurring revenue are usually very attractive and would sell more quickly.
- Location of the business. Your business’ location also affects its marketability. A business in a location that promises organic growth will appeal to buyers, making the sale quicker. For example, the hottest national franchise businesses are in choice locations.
Business Issues You Should Consider When Selling a Business in Dallas
When selling your business, you should pay attention to confidentiality and legal issues so that the sale does not put the company at risk in the foreseeable future.
Consider discreet marketing. Announcing to the public that you are selling may affect sales. Some customers may take their business away, fearing how new owners will handle their accounts.
You should also make potential buyers sign NDA. Many will not be interested enough to see out the deal after being privy to confidential information.
You should truthfully describe the business’ position to the buyer. While you should present the business in the best possible light, you shouldn’t hide potential problems.
The standard practice is to avoid dwelling on the problems and to present possible solutions to problems you disclose. Full disclosure to buyers protects you from being sued by the business’ current owner for false representation.
You should also act with good faith towards partners (if there are any). Fully disclose to your partners any material fact relating to the sale. This protects you from being sued by your partners.
Another common issue that arises from selling a business is the handling of outstanding obligations. You should fully disclose obligations to the buyer, and if possible, get the buyer’s commitment to honoring them.
This would protect you from being sued by debtors and clients from suing you for non-fulfillment of contracts.
Sell Your Dallas Business At the Right Price With Sigma Mergers & Acquisitions
Selling a business can be tricky. However, with the steps above, you can sell your Dallas business without stress or issues while getting maximum value and protecting your legacy. Using a business broker is invaluable to selling your business stress-free, getting the highest return on investment, and avoiding issues.
Sigma Mergers & Acquisitions is the leading business broker in Dallas, TX. We’ll guide you all the way, from before listing to closing.
- We provide a free business valuation, giving you assurance you are selling for the right price.
- We’ll connect you with thousands of active buyers that are best positioned to purchase your business.
- We’ll use industry-leading technologies and best practices to protect the anonymity of the sale.
Want the best when you sell your business? Book your free consultation or call Sigma Mergers & Acquisitions (214) 214-9400.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!