Starting a small business is a commitment, to say the least. You’re looking at at least two years—possibly more—of operating in the red, and a mere 40-hour work week is a thing of the past. But what happens a few years down the road?
Why would I want to stop running my business?
That depends, of course, on why you started the business in the first place.
Your goal may have been to continue running your business for the rest of your life, or it may have been to sell to a larger, more established company as quickly as possible and turn a neat profit. Whatever your plans, the reality is that not all companies last forever, and not all business owners own businesses forever.
Here are a few situations where your entrepreneurial journey may be over—the current one, anyway!
Your industry is changing.
When digital photography was a whisper on the horizon, film companies had a choice: adapt and reinvent themselves to go with the flow of the market and stay relevant, or keep their business model how it is and assume everything is going to work out fine, and suffering the consequences of a dwindling market for an obsolete product.Of course, if you’re not interested in taking a new direction with your business, that’s completely fine. There’s a third option: close your doors and use your profits toward your new adventure. Just don’t go the way of the Polaroid!
You receive an offer that surpasses your wildest dreams.
Whether or not you’re selling your business (and, yes, you could potentially receive an offer to buy even if you’re not really in the market to sell), the option of being bought out by a larger corporation is definitely a possibility.
Sure, it can be difficult to step back and let go, if you weren’t in the mindset to do so. And if you can’t see yourself ever being as happy as you are running your business, then the choice is clear. But if someone offers you money that would enable you to start that next dream business of yours at very little personal risk, and your interest in your current status quo has been waning anyway—what are you waiting for?
You’ve taken it as far as you’d like to take it.
Expansion isn’t every small business owner’s dream—you might have built a successful little establishment, but that doesn’t mean you need to accept every franchising option that comes your way or have any desire to push to expand.
If your business has potential to expand, but you’re just not interested in doing it yourself, you might consider passing it off to someone who is, either by franchising or by selling it outright.
You’re just plain sick of the sight of it.
If waking up every morning to run your business is a drag, it might be time to consider moving on to something that makes you happier.
How do I sell my business?
To sell your business, you’ll need to list it in any of the numerous business sale directories out there—but first, you’ll need to get your house in order.Anyone considering buying your business will want to see the following, at minimum:
- Three years of profit/loss statements
- This year’s profit/loss statement to date
- Three years of balance sheets
- Three years of tax return documentation
- Lists and copies of contracts with vendors, suppliers, affiliates, etc.
- Lists of leases, property and rental agreements, etc.
You’ll also want to have a good idea of what your business is worth, both so you’re not holding out for a great offer based on unreasonable expectations, and so you don’t get seriously undervalued.
Hopefully, your business is worth more than the face value of its assets—after all, a business is more than the sum of its measurable parts. You bring to the table not only your hard assets, but also experience, customer loyalty, knowledgeable staff, an eye for your market, and countless other reasons a potential buyer should consider taking over yours rather than starting their own from scratch. But how do you measure these intangibles?
It’s generally a good idea to hire a professional business appraiser. (There are also many free or low-cost tools available online to help you determine what your business is worth, if you don’t feel a professional appraiser is something you can afford.) But remember, at the end of the day, the value of your business comes down to what a buyer is willing to pay—no more, no less. The appraisal value, while important information, is just a starting point for negotiations.
How do I close my business?
If you’re closing a business rather than selling it, you probably won’t need a professional appraisal. Closing a business carries a whole different set of requirements.Here are the basic steps to closing your business:
- Close your EIN. (Your EIN will continue to exist, but the IRS should be made aware that it’s no longer connected with a profitable, operational business.)
- Dissolve your business with the state. (If you do not, you will continue to owe taxes, even on a business that isn’t bringing in revenue.)
- Officially cancel any DBAs, business licenses, or permits you may have obtained. (If you’re unsure how to do this, check with the offices from which you initially obtained these filings/registrations, or check with your corporate attorney.)
- Publish notice of your dissolution, if required by your state.
- Alert your state tax office that you’re going out of business and finalize any remaining obligations.
The best way to close your business, to be sure you’re not missing any steps that might require you to pay fines or late fees down the line, is to work with your business advisor or corporate attorney to close your business.
[Click&Inc provides corporate dissolution services for just $99. If it’s that time, ask us how we can help.]