In our last post, we covered the closing process in the sale of a business and how a broker is able to help you along in this final step of the transaction. Below, we will cover exactly how to prepare for the close and what specific preparations are needed in order to carry out the close.
After all the decisions have been agreed upon, it is finally time to prepare for the closing. Although an attorney will prepare the closing documents, it is important to be prepared and understand what to expect. An advantage of buying an ongoing business is that the business continues to operate immediately after the closing papers are signed.
Because some continuing expenses must be prorated, the division will be agreed upon by the buyer and seller and included in the closing papers. If the work in progress is a consideration, it is unlikely that all jobs will be completed before closing. When inventory is ordered for a specific job to be completed and billed after closing, the seller wants to be reimbursed for his/her inventory expenses attributed to that job. Also, when labor is allocated to a specific job to be completed and billed after closing, the seller wants to be reimbursed for his/her labor expenses attributed to that job. Another consideration is the backlog of future jobs, which is attractive for a buyer.
The list of assets included in the sale of the business will be included in the final documents, as they will be owned by the buyer. In addition, contracts will sometimes be in place for equipment and maintenance that is leased or on a payment plan. The buyer will take over the payments for these items, and a proration may be needed to balance what has been paid and what is owed. Ideas of possibilities that might have contracts are the following: telephone system, office equipment, security system, computers, and ice machines or coffeemakers if the business is a restaurant.
If you’re ready to sell your business, these steps are necessary, and will help you find a Business broker with years of experience to help execute your sale. A great way to begin this process will be to contact Moche Hazout at Transworld Business Advisors today!