How to Sell a Machine Shop Business

Selling your machine shop business requires legal expertise with contracts.

Selling a business is a complicated process that must be handled with care to avoid panic among employees and customers. Your machine shop business is your livelihood; if you built the shop from the ground up, you should receive a fair price for your hard work. Plan far in advance before placing your shop on the market. Every critical detail must be hammered out to avoid an unhappy buyer and possible legal action.

Instructions

1. Examine the potential problems that face your machine shop business. Interested buyers will need a lot of information regarding the health of your business before they buy what you're selling. If your business has experienced a slow quarter, needs infrastructure upgrades or has other problems, you should relay this information to buyers. If a buyer feels that he was misinformed about the purchase, he could sue you.

2. Hire an appraiser to set a value for your machine shop business. The appraiser -- usually a certified public accountant -- will examine your books and tax records to formulate a price for your business. The final document is called a "valuation report." The report is a critical tool to negotiating the final selling price of your machine shop. Many things affect the value of your business, including debt and assets. Use the valuation report to justify your sale price.

3. Choose a selling value for your business. Aim for a price above your valuation report so you have room to negotiate. If your business is of strategic importance to potential buyers, you may be able to ask for a price that is higher than the actual "value" of your machine shop business.

4. Create a selling sheet that describes the history of your machine shop business, the services it performs, its strengths, its weaknesses and information about the machine shop industry. This sheet will serve as an informational tool to buyers.

5. Advertise to potential buyers for your business. If you have children or friends that may be interested, discreetly approach them first about the sale. Place ads in your local or regional paper. Use online classifieds as well for a larger reach. Use caution with your advertising. If your employees, suppliers or investors find out that you are selling the company, they may feel that the machine shop is in financial danger.

6. Hire an attorney once you have found a buyer for the business. Selling your business involves careful attention to legal details and contractual obligations. An attorney will help to formulate a sales contract that ensures you and your buyer are protected after the sale. You must tell your attorney what sort of payment structure you are willing to accept as well as any other terms that are crucial to the sale.

7. Sign the final sales contracts with your buyer and collect the transaction payments. Sign the documents in front of your attorney and another witness if possible. The sales documents are crucial to avoiding lawsuits and problems in the future regarding the sale.

Tips & Warnings

• Negotiating the final sale without a lawyer leaves you at high risk for legal trouble in the future. Lawyers are versed in the business regulations of your state, and will cover any holes in a contract that you might miss.

References

• The New York Times: How to Sell Your Business