Not tax or legal advice. This article is general information based on my own experience selling a business. Every business and deal is different. Talk with your own CPA, attorney and financial advisor before acting on anything here.
The short answer
Almost everything. The price is the headline, but what you actually keep, and what you're committed to after closing, lives in the terms: how much is paid at closing, how much is held in escrow, any earnout, the non-compete, insurance that covers claims after closing, and your role after the sale. The best way to improve those terms is to look at your business from the buyer's side and remove the risks they'll see.
Terms worth your attention
Cash at closing vs. later. In my deal, almost all of the price was paid at closing, but escrow held back almost ten percent. Escrow is money set aside to cover problems that show up after the sale.
The earnout. Part of the price is paid only if the business hits targets after you sell. Mine was a meaningful amount, and we negotiated it down. Read exactly what the targets are and who controls whether you hit them. (I learned why that matters the hard way; see life after selling.)
The non-compete. How long, how far and what it covers. What it's tied to matters too: courts generally give more room to a reasonable non-compete tied to selling your ownership and goodwill than to one tied only to employment, even in some states that ban most employee non-competes. State laws vary, and even sale-of-business non-competes usually have to be limited to the areas and lines of business where the company actually operated.
Insurance after closing. Some liability policies, such as professional liability, directors and officers, cyber and employment practices policies, only cover claims made while the policy is active. A "tail" extends the time to report claims for a set period after the sale, for things that happened before it. Who pays for it is negotiable.
Your role after the sale. How long you stay, what you do and how you're paid.
Ask: would I buy this business?
Looking back, the most useful thing I could have done is look at the deal from the buyer's side. We had no long-term contracts; our clients were basically month to month. If I were the buyer, that would worry me too. Escrow, earnouts and tough terms are how buyers protect themselves against risks they see. The more of those risks you remove ahead of time, the better your terms can be.
Get an M&A attorney
I had never needed an M&A attorney, and I didn't know who to call. Your regular business attorney may be excellent, but a sale is a different kind of work. Find someone who does it every day.
One thing to try this week
Write down three things about your business that would worry you if you were the buyer. That's your list.
Related questions
This article is for general information only and is not tax, legal, investment or financial advice. RealDeal360 is not your attorney, accountant, tax advisor or investment advisor.