Blue Smoke

SELLING THE BUSINESS

The Challenge of Selling a Business

business man hand sign about sell asset,

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We Listen to You

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Goals & Objectives 

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Selling a business to an outsider is probably the method that will result in the most cash for you.

Is selling your business the right option? Maybe, but you must prepare.

Most Businesses Never Sell

 

“Historically only one-quarter to one-third of all private companies ever manage to find a buyer.”   ~ Inc. Magazine.

Why the high failure rate?

  • Business is priced incorrectly

  • Business is not properly prepared for sale

  • Insufficient market exposure to potential buyers

  • There are just more sellers (companies for sale) than buyers who could realistically buy and operate a business

Who are the Buyers?

  • Employees

  • Strategic same or related industry acquirers

  • High net worth individuals

  • Professional investment firms such as Private equity firms

What Buyers Want?

  • Profitable business

  • Experienced, loyal, and motivated employees

  • Diverse customer base

  • Sustainable growth potential

  • Strategically well-structured business – asset / compensation / tax planning

What’s My Business Worth?

  • Unlike in real estate, comparables can be unreliable because almost every business is unique in costs, expenses, profits, and management

  • Unlike public companies, market share equity prices are unknown in a privately held business

  • A common mistake is to use simple multiples or “rules of thumb”. This is what Business Brokers often do.

Key Factors to Successfully Sell a Business

  • A business that does not have too many “issues” or eccentric features that can scare away a buyer. A business ready for sale is one that is prepared well in advance

  • Realistic Pricing in line with the market

  • Provide the buyer with a fair market salary

  • Availability of Capital, both debt and equity

  • Service acquisition debt in 3 -5 years

  • Fund capital expenditures required to maintain historic revenues

  • Provide a reasonable return on investment

Signing a Contract

When to Sell Your Business

 

Many would agree that the hardest part of going into business is starting it.

 

But there is one other decision about businesses that is just as challenging and difficult to make: deciding when to sell the business.

 

Deciding to sell a business is never an easy decision, but once the decision has been made to sell, strategic planning is essential.

In short, the benefits of selling far outweigh the cost of keeping it going. This requires comparing the offer (how much your prospective buyer is willing to pay) and the returns that you are currently receiving and will likely receive in the future, should you continue running the business. 

The Baby Boomer “Tidal Wave”

  • 7 out of 10 businesses will be for sale in the next 10 years

  • Largest transfer of privately owned businesses in U.S. History

  • Inc Magazine – “An estimated 65 -75% of small businesses will go up for sale in the next 5 to 10 years! Why? Retiring Baby Boomers. Boomers who have been putting off selling their businesses because of the recession.

Blue Smoke

ABOUT US

PlanMyBusinessExit

We are business transition specialists. We help owners, family members, and advisors evaluate exit and succession options and implement plans to successfully transition businesses.

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