For Business Sellers
Selling a business is one of the toughest decisions a business owner ever makes. Whether the decision is based on burn-out, age, health, market conditions, or other factors, the business has 'become your baby', and letting go is very difficult. Many business owners make big mistakes in this process that cost them thousands of dollars, or more, because they don't understand the process of selling a business.
It doesn't have to be that way. The professional Business Brokers and Intermediaries of the PBBA are dedicated to helping you navigate through the intricacies of selling your business, while achieving the goals you have set forth. PBBA Brokers and Intermediaries are well trained professionals and are consistently upgrading their skills and professional designations through certified courses and workshops. This means you have quality, up to date trained professionals working on your behalf.
Although each Broker or Intermediary has his or her own style, PBBA members follow this general process of positioning your business for sale. A step-by-step process alleviates the stress of selling your business and ensures you'll get the maximum price.
- Determining the worth of the business. This is usually referred to as the business valuation. There are numerous formulas for determining the value of a business, based on the type of business and the buyer type.
Review the findings with your broker. If the preliminary results are not at a level you had hoped for, work with your broker to develop an improvement plan and timetable.
Owners must be realistic when determining a sale price, eliminating or at least minimizing the emotions of ownership. With the availability of Internet research and other market value databases, buyers are generally knowledgeable about realistic asking prices. As a result, they're unlikely to pay too much for a business. Many sellers tend to overvalue their business, a condition that may delay or kill a transaction with an otherwise ready buyer. This is why a professional business valuation is a wise step.
- Maximize the value of your business. The next step in the process is developing a marketing plan for your business. The goal is to maximize the value of your business in the eyes of a potential buyer. The following tips may help sellers get the highest price:
A.) Well organized and up-to-date financial records
B.) Build a solid management team
C.) Ensure the property and operating facilities are in good shape and present you in your best light
D.) Seek tax advice from a tax professional. Sellers will not be able to keep all the proceeds from the sale of their business. Taxes can amount up to 50% of the sale price. Having the properly structured sale, whether a stock or asset sale, can minimize taxes.
E.) Don't take your eye off the 'business ball' during the sale process. It is not unusual for the initial offers to fall apart. It is critical to keep the business running well, or you may lose value due to poor performance or other factors attributable to mentally 'checking out'.
F.) Think how the sale will affect employees. Make sure they are brought up to speed at the appropriate time. Enlist the advice of your Broker or Intermediary for your specific situation.
- Finding a Buyer. Finding the right buyer requires patience, evaluation and negotiation. This can be the most daunting part of the process, but if owners plan for sale several years in advance, they'll have time to set their own terms, rather than making decisions under pressure and under someone else's terms. To alleviate concerns, owners should consider the following:
G.) Evaluate a prospective buyer's personality and skills for suitability in running your company.
H.) Don't "nitpick" in negotiations. Buyers and sellers sometimes argue over details that aren't that critical. Compromise makes for a more successful process.
I.) Negotiate with more than one buyer. This affords a position of strength and lets owners mix and match some features of each offer. Try to secure the sale, but keep the business on the market until closing.
- Exiting After the Deal. Once the deal has been signed, the work of creating a smooth transition is critical to both buyer and seller. Buyers of course want a successful business that produces profit for them. Sellers want the company to continue profitably to make sure they get paid any 'earn out' money. Only the logistics of making a smooth transition to the new owner remain. By ensuring the proper staff and management are in place, an owner will become less essential to the day-to-day operations.
The bottom line is that selling a business is one of the most important decisions a business owner will ever make. With advance planning, an owner can sell his or her business at the right time and structure the deal to net the highest profit. And, by consulting a Business Broker or Intermediary professional, owners can focus on running their business and let the professional focus on the sale.