Sell Your Business Effortlessly
Leading the way in business sales and exit strategies
Selling your business is a momentous decision. You have sacrificed time, relationships, money and energy into growing and managing your business. Your business may, in fact, represent your life’s work. If you have made the decision to sell your business, you want the very best professional guidance you can find. You may even wonder about the best place to sell a business. It is in times like these that working collaboratively with an experienced business broker can be the difference between simply offloading the business, or selling it for the best price and terms possible. Below are the most popular FAQs brought up by sellers. If you have any questions that haven’t been covered, please don’t hesitate to contact us.
The first question most sellers ask is: “What is the value of my business?” To be fair, if we were selling our business, this would be the first thing on our minds.
Of course, your business is worth what the market is willing to pay. In other words, the exposure, the presentation, the timing, the communication, and a number of other factors really matter, so there is a lot to be gained by doing the things right the first time.
We will gladly let you know the potential value your business can achieve.
There is a number of considerations involved in the decision. Some of them are likely personal and not easy to assess, even by an expert.
However, you should ask yourself whether you are sure you want to sell your business? If the answer is affirmative, try to imagine how do you envision your position after the transaction is completed. Are you likely going to be better off? What needs to happen for you to be completely satisfied and not look back?
If you can answer those, regardless of how realistic your goals – including the monetary expectations – are, you will be able to make your decisions much easier down the line.
The most important question you have to answer is this: “Are you sure you want to sell your business?” If you’re serious and have a good reason why you want to sell your business, the likelihood of that happening is strong.
You can increase the odds of you selling your business exponentially if you can answer truthfully ‘yes’ to the following question: “Do you have reasonable expectations?” An answer in the affirmative is a good indicator you are ready to sell your business.
In two words: “Start Preparing!”
Before you even consider putting up your business for sale, here is a checklist of the information you need to gather:
- Profit and Loss statements for the past 3 years or more
- Business Federal Income Tax returns, ideally for the past three years or so
- List of fixtures and equipment
- Documents related to your lease
- A list of loans against the business (loan terms, amounts, payment schedule)
- Copies of equipment leases, if any
- A copy of the franchise agreement, if applicable
- An approximate amount of the inventory on hand, if applicable
- List of names of outside advisors, if any.
Make sure the financial statements of the business are accurate, as the prospective buyers will invariably check them. If midway through the current year, make sure last year’s figures and tax returns, as well as year-to-date figures, are available. It is wise to get professional help, if it can be afforded, to make these statements presentable. We want to cast your business in the best light possible.
Valuation of a small business is in most cases based on the discretionary cash flows. Those include not only business profits, but also the owner’s benefits, along with the depreciation, etc. Don’t despair if the bottom line is different from what you anticipated. When the proper adjustments are accounted for, your business’ cash flow will almost invariably look significantly better.
Prospective buyers will want to review your books. The prospective buyers will most definitely want to see a detailed breakdown of the business’ income and expenses. Can they make the payments on the business and still make a reasonable profit? Truthfully, if your business is not a generating sufficient cash flow for the given price, it may not sell.
Negotiating the terms and closing the transaction is often the most intense and stressful period, as all the parties involved all have competing interests. The best way to handle the issues depends on the situation and requires the experience. Regardless how you decide to go about the sale, make sure you have the right experts in your corner.
The short answer is: “it depends.”
There are many reasons someone might be interested in buying your business. It is imperative that both buyer and seller be serious about the potential transaction. If the buyer is not serious, the sale will never close. Here are a few reasons that buyers would buy businesses:
- Better returns on assets
- Strategic purchase
- Career change (layoff, burn out, seeking better earning potential, early retirement, etc.)
- Serial investors seeking another challenge, and
- The grass is always greener on the other side
Here are some tips if you’re buying a business for the first time.
The main thing to be aware of if you want to sell your business is that the vast majority of buyers are interested in buying cash flow. Work with your bookkeeper to get your financial statements in order, with cash flow the order of business. Be careful not to confuse cash flow with profit.
Experienced buyers will look at the profit and loss statements or business tax returns, as well as owner compensation. They will review any excess compensation to employees and family. Buyers will take a look at large, one-time expenses such as new software systems and equipment.
Non-cash items like depreciation and amortization will be taken into consideration as well. Interest expenses and owner prerequisites will be reviewed. These are things an experienced business broker takes into account when advising a selling client on a selling price.