Building a business from scratch is one of the biggest investments you can make. It takes countless hours, help from friends and family, and significant resources to create a successful business, especially in a high-competition area like Austin, TX.
After you’ve already done all of the hard work and created a thriving business, you’re likely looking forward to the next step: cashing in on your investment. If you’ve been asking yourself, “How do I sell my business in Austin, TX?” then keep reading for everything you need to know.
Step 1: Determine Business Value
The very first step to take is determining how much your business is actually worth. You can move forward once you’ve determined your business’ value and identified an acceptable profit margin. The last thing you’d want is to accidentally underestimate your value!
You can do some of this on your own by researching the market and seeing what similar businesses are selling for. However, it’s generally best to go through a business valuation professional.
A business valuation agency can perform extensive research to give you a concrete value. This number is also more likely to hold up during the negotiation phase of the sale since it was determined by an objective third party.
If you’d like to increase the value of your business, you can try the following strategies:
- Increase marketing efforts to increase brand awareness
- Diversify product or service offerings
- Refresh your brand identity to broaden your audience
- Streamline operations to increase profit
Step 2: Gather Financials
If you decide to move forward, the next step is to gather all of the documentation you’ll need to entice a buyer. Be as transparent as possible so that your buyer is set up for success.
The documents to include the following:
- Balance sheets
- Tax filings
- Current and previous budgets
- Cash flow and expense reports
- Profit and loss statements
- Current contracts, shareholder agreements, and business formation documents
Step 3: Find Your Team
Next, it’s time to assemble a team of professionals who can guide you through the rest of the process. There are three main members you’ll want on your team:
- First, retain a lawyer who can make sure you comply with all laws and regulations surrounding business operations and sales.
- Second, you’ll need a business broker who can market your business and use their connections to find buyers.
- Finally, you’ll need an accountant who can ensure all of your financials are current and easy to understand.
Step 4: Find a Buyer
Many people see their small businesses as being their children. In this case, passing the mantle is more than just handing over ownership — it’s handing over a legacy.
If this is you, it’s important to be judicious when it comes to potential buyers. Look for buyers who align with your brand and will protect the integrity and vision of your business.
Even if you aren’t sentimentally attached to your business, one of the keys to selling your business is finding a capable buyer. Look for a buyer who has experience running similar businesses, significant financial stability, and a proven track record of success.
Step 5: Close the Deal
Once you’ve gotten your business ready and found a buyer, it’s time to finalize the sale. Have your lawyer draw up an air-tight contract and double-check that all of the necessary information has been included and documented.
The contract should include a detailed breakdown of what exactly is being sold, how the property will be transferred, and how you will be paid. (Make sure to include both the payment method and the payment structure.)
Once the contract has been signed and you’ve been paid, transfer ownership of the business. Include any assets that are listed in the contract and any licenses that are necessary for the operation of the business. Before you leave, prepare your employees for the transition and build excitement for this new chapter.
Step 6: Prepare for Taxes
It might be tempting to just stop at the sale. While it’s good to take a few days to celebrate your achievement, don’t let too much time pass before you get ready to pay taxes. This might not be part of the sale process itself, but it’s a crucial part of selling your business.
Any money you make on the sale of your business is considered capital gains, which are taxed differently than your normal income. Texas itself is one of the few states without local capital gains tax, but you’ll still need to pay at the federal level. Short-term capital gains could be taxed as high as 37 percent. Long-term capital gains (assets held generally longer than a year) could have a lower tax rate — closer to 20 percent.
You may be able to minimize the hit of these federal taxes by working with an accountant and certified tax professional. They can advise you on when to sell, how to record the sale, and what to do with your profit in order to walk away with more money in your pocket.
Wrapping Things Up
Building a business is hard work, but it can pay off big time when you’re finally able to sell your business. To sell your business in Austin, TX, the main steps you’ll need to take are determining the value of your business, marketing your business, finding a buyer, and completing the sale.
