Warning …. I have to admit that the title is a bit misleading. I would never admit that selling a business is easy. It is not. It is hard work. I know, I’ve been a Business Broker since 2006. However, if you have a plan and follow a proven process, selling your business can be a whole lot easier and yield you a higher price when it comes time to cash out.
#1 Plan to sell your business
In an ideal world, you started your business with an exit plan in mind. In the real world, this isn’t the case. The reality is, you can’t work forever and eventually you will either; close your business, transfer your business to family or employees, or sell your business. Given my experience, my hope is that you avoid the Dreaded “D’s” of selling your business.
There are two kinds of sellers – those that HAVE to sell and those that PLAN to sell
Too many business owners only know that it is time to sell when one of the big Ds force them to talk to buyers:
- Disagreement among partners
- Disinterest (owner burnout)
- Disinterest (the kids don’t want the business)
- Downturn in the business
#2 What is your Business Worth?
For obvious reasons this is a very important question. You need to have a realistic idea of how much your business is worth. If you are not happy with the results of your business valuation, at least you will know the what the valuation methodology is and you can make the adjustments, growth, etc… to get to the number you want.
Contact us for a free and confidential Business Valuation. In the simplest terms a business has a value to a business buyer which will be dependent on a multiple of the earnings he/she expects from the business. To perform a business valuation we will review the past 3 years of business financial statements and tax returns. We will re-cast the business earnings and apply an industry specific multiple, and boom….you get a value.
#3 Business Documentation
If you want maximum value for your business, good/excellent books and records are key. What sorts of documents should you have ready, organized, and available? Here is a snapshot of documents you would need. Keep in mind that this list will vary depending on business, and is not exhaustive.
- Three years of financial statements (plus current YTD) and business tax returns
- Your lease
- List of equipment/assets included in the sale
- List of employees with job descriptions, time at the business, & pay/salary/benefits owed
- Any operations/HR/safety/etc. manuals
- Any contracts with vendors and customers
#4 You Should Use a Business Broker to Sell your Business
You should use a Business Broker to sell your business. Of course we are biased, but that doesn’t makes us wrong. If you find the right Business Broker to sell your business, these are some of the benefits you will enjoy.
- Business Valuation. If the Business Broker you use is experienced, he will know how to properly price your business and get you the most value.
- A Business Broker’s job is to sell businesses and it should be a full-time job. It is very likely that as a business owner you may never had to sell a business. Let the broker sell your business so you can continue to focus on running your business.
- Business Brokers screen potential buyers. This is important, you should only spend time talking to potential buyers that are a good fit and are qualified to buyer your business
- A Business Broker should know how to market your business for sale confidentially. This is probably in your best interest. You don’t want your employees, customers, vendors, or competitors know that your business is for sale.
- Business Brokers should be trained and experienced in making and closing the deal. They balance the competing interests of the Buyer, Seller, their accountants, attorneys, spouses, etc.
- Business Brokers keep the deal moving forward and make sure the Buyer and Seller keep to a strict timetable.
#5 Close & Transition
So you found a great Business Broker, sold your business for a great price, adn escrow just closed! All done right? Well almost.
- Make sure you discussed the optimal allocation of purchase price with your Business Broker and tax professional. Don’t forget IRS Form 8594
- Make sure you discussed and negotiated an adequate training / transition period.
- Make sure your Business Broker and/or escrow has protected your seller note with proper security and UCC recording/filing
- Make sure you file the proper closing tax documentation to maintain your tax compliance. Here is a sample list from the IRS
How long does it take to sell your business?
Every business seller asks us this question. Truth is, I have no idea. Over the years, the businesses I thought would sell tomorrow, somehow never sell and vise versa. BUT, on average, give a business with good records and average profitability, it take about 9 months.
Bottom-line, every business owner needs an exit plan. And every business owner has questions: Will you transfer your business to family when you are ready to retire? Should you sell your business and cash out? When is the right time to consider selling your business and/or other options? How long will it take to sell your business? How much is your business worth? We are Business Brokers and his is what we deal with everyday, we can help. Contact us today! 1-800-Biz-Broker