Is it time to sell your business? you have devoted your time, energy and money into building, running, and operating your business. It may well be your life’s work. If you have already decided that now is the right time to sell your business, you want the very best professional guidance you can get. This is when working in tandem with a professional business broker can make the difference in selling your business for the very best price and terms!
Following are some of the most common topics and questions frequently brought up by sellers. If you have any questions that we have not covered, please don’t hesitate to contact us.
For Business Sellers
If you have gone this far, then selling your business has around enough curiosity for you to take the first step. This section should answer some questions and help you through the process itself.
The first question almost every seller asks is: “What is my business worth?” Quite frankly, if we were selling our business, that is the first thing we would want to know. However, we’re going to put this very important issue off for a bit and cover some of the things you need to know before you get to that point. Before you ask that question, you have to be ready to sell your business for what the market is willing to pay. If money is the only reason you want to sell you business then you may not be a motivated seller.
You may have an idea of what you think your business is worth, or what you want for it. You may also have gotten the idea from your accountant, Banker, Attorney, or best friend about what your business is worth, however only the marketplace can decide what the value of your business is.
The second question you have to consider is:” Do you really want to sell your business?” If you’re really serious and have a solid reason why you want to sell your business if you can answer yes to the second part of this question: “Do you have reasonable expectations?” A yes answer to these two questions means you are serious about selling your business.
So let’s assume that you have decided to at least take the few first steps to actually selling your business. There are a number of items below which are helpful in selling your business.
Here’s a checklist of some important items:
- Two years’ profit and loss statements
- Tax returns for the business
- List of fixtures and equipment
- An approximate amount of the inventory on hand, if applicable
- BAS for the last two years
If you’re like many small business owners, you’ll have to search for some of these items. After you gather some of the items, you should spend some time updating the information and filling in the blanks. Have all of the above put in neat, orderly format. Everything starts with this information.
Make sure the financial statements of the business for sale are current and as accurate as you can get them. If you’re half way through teh current year, make sure you have last year’s figures and tax returns, and also year-to-date figures. Make all of your financial statements presentable. It will pay in the long run to get outside professional help, if necessary, to put the statements in order. You want to present the business opportunity well “on paper”. Pricing a small business usually is based on cash flow. This includes the profit of the business, as well as the owner’s salary and benefits, the depreciation, and other non-cash items. By the time all of the appropriate figures are added to the bottom line, the cash flow may look pretty good.
Prospective buyers eventually will want to review your financial figures. Buyers want to see income and expenses. they want to know if they can make the payments on he business for sale and still make a living.
Realistically, if your business is not making a living wage for someone, it probably can’t be sold. You may be able to find a buyer who is willing to take the risk, or an experienced industry professional who only looks for location, etc. and feels that he or she can increase business.
Who are the Buyers?
We will market to a variety of different types of buyers and try to find the most qualified buyers to buy a particular business. Buyers buy businesses for many of the same reasons that sellers sell businesses. Here are just a few of the reasons that buyers buy businesses:
- Laid-off, fired, being transferred (or about to be any of these)
- A company looking to expand their current business through an acquisition
- A Company that is interested in buying a business that will be complementary to their current business.
- Individual that took early retirement
- Private equity group that wants to make a profitable investment
- International buyers looking for a business visa
Here are some questions that you might be asked-and, should be prepared to answer:
- How much money is required to buy the business
- What is the annual increase in sales?
- What is the debt?
- Will the seller train and stay on for awhile?
- What makes the business Special/Unique
- What further defines the products or service? Bid work? Repeat business?
- What can be done to grow the business?
- What can the buyer do to add value?
- What is the profit picture in bad time as well as good?
- Why are you selling?
Buyers want cash flow
The first thing to keep in mind is that the vast majority of business buyers want to buy cash flow. Sit down with your accountant or bookkeeper and begin to get your financial statements in order, with cash flow the order of business. Cash flow is not the same thing as profit. Most buyers look at profit and loss statement or tax return, as well as owner or family compensation. They will consider any excess compensating to employees and family. Buyers will also look at large, one-time expenses such as a new computer system or remodeling. They will consider non-cash items like depreciation. Interest expenses will be reviewed, as will owner prerequisites. These are items that a professional business broker considers when advising a selling client on a selling price.
What can the seller do?
There are many things that add value to your business such as customer lists, proprietary products and/ or techniques, well-maintained equipment, customized software programs, or good employees. Look at your business very carefully so you don’t overlook those items that make your business more attractive to the buyer, and adds value.
Review every facet of the business and remedy any problems that could appear during the sale process. No one likes surprises-most of all potential buyers. Whether legal, accounting, environmental, or anything else-try to solve it now.
We look forward to working with you in finding a suitable buyer for your business You, as the seller, are an integral part of the total marketing program.
We advise you to do the following:
- Keep normal operating hours. There may be a tendency to “relax” when you put your business up for sale. However, it’s important that prospective buyers see your business at its best.
- Repair signs, replace outside lights, etc. You don’t want your business to look as if it has been neglected.
- If you have inventory, maintain it at a constant level. If you let your inventory slide, your business will look neglected. If anything, increase it so your business will look busy.
- Remove items that are not included in the sale and unnecessary items, especially if inoperative.
- Repair non-operating equipment or remove it if you are no using it.
It might also be helpful if you took a good look at your business from the perspective of a buyer. try to put yourself in the place of a prospective purchaser of the business. What would you do to make it more attractive or more saleable? Obviously, the financial records of your business are critical to the sale of your business, but how it looks is also important. First impressions really count! If a potential buyer doesn’t like the appearance of your business, the rest of it may never get a chance. If you have any questions, please don’t hesitate to call us. We look forward to hearing from you!
Do you have other questions?
Please call us on 0422 466 225 if you have the following questions.
- How long does it take to sell my business?
- What can business brokers do?
- What can i do to help sell my business?
- What happens when there is a buyer for my business?
- Why is vendor financing so important to the sale of my business?