Many business owners don’t know how to sell their business, who to sell it to, how much their business is worth, how long it takes, and who helps business owners sell their business. I hope to help answer some of these questions in this article. If you are a business owner, it is important to understand answers to these basic fundamental questions. Having this information during the first few years of business start up and not waiting until you want to sell will help maximize the value of your business, and help to sell it in less time. Having this basic knowledge helps the business value by allowing you to position your business in a favorable manner to a buyer as well as setting up your systems that are easy to “take over”. Selling a business is a complex process and I don’t recommend a business owner taking on this challenge without the support from professionals who understand it. Utilizing the skills of a good business broker will allow you to get your business sold quickly and for the highest purchase price.
How to sell a business?
You hire a good business broker. If they don’t already have buyers that would be interested in purchasing your business, they will qualify buyers interested in purchasing your business. We list the business for sale on multiple web sites like biz buy sell and bizquest. When a buyer is interested, they will meet with them ahead of time to discuss generic information about the business without the buyer knowing which business it is. Protecting the business from “getting the word out” is extremely important and having a business broker to help you with confidentiality is the best approach.
Selling a business can be a lengthy process, so don’t expect to close on your business in a month. Selling your business should be planned out well in advance to maximize your value and so you know what to expect during the process. Waiting to find out this important information on the process and value for when you want to sell your business is not smart. If you do wait, it could take years to position yourself favorably to interested buyers. If you own a business, you should find out this information ahead of time so you know how to make decisions on the structure of your company in order to meet your finish line goals. Form a relationship with a licensed business broker to help gather this information.
Everyone will exit their business at some point in time and understanding how your business can be transferred and what it is worth is a very valuable part to growing your business. Selling a business requires a special set of skills and knowledge and should not be taken on by one person. Selling a business should require input from business brokers, accountants, and lawyers. You need a team around you in order to protect you and your business, facilitate a smooth transition, and maximize your return. Anyone that tells you they can sell your business just by themselves or without these other individuals involved is naive and I would be very skeptical doing business with them.
Who do I sell my business to?
A buyer is either going to be another business acquiring your business to expand on their operation, or some entity or person that wants to invest by purchasing your business because they are interested in the profit from your operation, which will pay them a return on their investment.
In some industries it is very common for acquisitions to happen. In this case, competitive businesses operate on a very similar structure offering similar services. A great strategy for business growth is to acquire competitors because it can be much faster and far less expensive for a business to grow through acquisition than organic growth. A business broker will help in finding that buyer which could be a competitor looking for growth through acquisition. If you are looking to grow through acquisition a business broker can help you find a good business to purchase as well.
What is my business worth?
Although there are ways to value a business by using comps in your industry to help determine a purchase price, it is only worth what someone is willing to pay for it. Working with a good business broker will help you to determine and understand your listing price and what you can expect to get for your business. A good business broker will understand your industry and be able to do research on what other businesses like yours have sold for. A valuation by a certified business appraiser is typically not necessary in a business transaction. Working with a good business broker again will help make sure you are maximizing your value. Many times your value or purchase price is based upon a specific multiple for your industry. You would determine your EBITDA which stands for earnings before interest, taxes, depreciation, and amortization. This could also be called free cash flow and multiply that number by the multiple for your industry. This will give you an idea for a range in purchase price; however, every business is different. Understanding how your company is structured, the staff, and how you compare to your competitors also should be considered.
How long does it take a business broker to sell my business?
Selling a business can be a lengthy process, so don’t expect to close on your business in a month. If a business is positioned favorably to sell it can still take 6-12 months to get to the closing table from listing. The process of selling a business can be time consuming so it is not in the business owners best interest to spend his time dealing with this process. The owner would benefit more by continuing to focus on operating his business and making sure it is continuing to grow. Finding a qualified buyer, negotiating, the state of the economy, and drafting the necessary documents by a good lawyer, are all items that will determine how long it can take.
Who helps business owners sell their business?
A business broker will walk the business owner from start to finish on the entire process. Many states require that the business broker be licensed. The business broker is the ring leader that puts together the proper team of people to get the job done. This should consist of a Business Broker, CPA, and Attorney. All of these people are typically involved in most business transactions. A good business broker will belong to an association for business brokers. In the state of Georgia, the GABB is a great option.
Having an attorney on your side is important to make sure both the buyer and seller are protected. Many times a buyer and seller will have separate attorneys drafting documents favorable for each party. This is where negotiations are put in writing and the legal paperwork is created. A good business broker will have attorneys that they work with and can recommend to business owners.
CPA’s are good to meet with as well in order to understand your tax implication and how to position your business. Many times how the documents are constructed can benefit the buyer or seller on their tax impact from the transaction.
As an entrepreneur, owner of multiple businesses, selling a company, and being involved in an acquisition, I understand how business owners feel about their business and the process. It is a life changing decision and it can be emotional. For many business owners, their business is their most valuable possession, and what they have put most of their working years into. During this time, leaning on a good business broker who understands a business owner’s position will keep their emotions from getting in the way during the process. Having a team around you to support you through this process will ease your mind as a business owner and will also maximize your return and expedite the process.