Are You a Seller?
ARE YOU A SELLER?
We are continually meeting with business owners who have thought about, or are exploring, selling their business. While you may have good reasons initially to consider selling your business (retirement, health, loss of interest or to pursue a new opportunity etc) those reasons may not make you a “seller”. Meeting with a business broker can help clarify a variety of issues—and allow you to make an informed decision about selling.
Timing: Is it the right time for you to sell?
Where are you in life?
Selling a business can be a lengthy and even emotional process. You probably don’t want to be distracted by other personal or professional demands that need your undivided attention. Ask yourself if you have the time and commitment needed for the process.
Where is your business in its life cycle?
Most businesses follow a “life-cycle curve”. Is your business growing; is it steady, or is it declining? Understanding the stage of your business will affect the way you price and market it.
What are the economic and/or tax implications?
Have you discussed a possible sale with your accountant or tax advisor? Your personal financial situation combined with changing tax law can have a substantial affect on your post sale proceeds.
Market Factors: Is My Business Salable?
What type of business is it?
Some businesses are more attractive to buyers than other types. Experienced business brokers should be able to give you a good sense of the expected buyer interest. Be objective, ask yourself what YOU think is appealing about your business.
Do you have accurate records?
Buyers are going to want detailed financial records to analyze your business. You’ll need accurate and timely reporting systems to meet buyer due diligence requests.
Do you have reliable employees?
Buyers want a business with stability. Do you have a key employee or employees that are integral to the business operation? Will they be there for the new owner?
Do you have a track record of earnings and profitability?
Sometimes consistent earnings are better than volatile, but higher profitability. Buyers will look at the last 2-4 years: how does your business look over that period?
What Should I Be Asking A Broker:
If you decide to engage a Business Broker you’ll need to choose the right one. You’ll probably want to hear a broker quote a high price for your business and a short time to sell—who doesn’t! But guess what? Those are the two very things that NO broker can guarantee!!!
As you are reviewing potential brokers ask yourself these questions:
- Do they understand my business, and can they demonstrate that? Do they ask the right questions and identify key issues? How can a broker explain your business to a buyer if they don’t understand it themselves?
- Can they explain and identify the potential buyer market? Who does the broker see as the potential buyer? How do they define the buyer pool? Keep in mind that no broker can say definitively that they have a specific buyer for your business: it just doesn’t work that way.
- What do they see as selling points, what do they see as negatives? Your broker should be honest about the positives and negatives of your business and how those might affect the sales process. You may not want to hear the bad points, but selling a business will take trust between you and a broker. A good broker should be able to identify the parts of your business that can be fixed prior to the sale.
- Can they explain the selling process and answer your questions clearly? Has the broker explained their methods for selling your business? Understanding how your broker does his job helps prepare you for the ups and downs of the process.
