Selling your business is a major decision!

You have devoted your time, money, and energy into building, running, and operating your business. It may well represent your life’s work. If you have already decided that now is the right time to sell, 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 between just getting rid of the business and selling it 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 click the Contact Us button below for assistance.

If you’ve gone this far, then selling your business has aroused enough curiosity that you are taking the first step.

You don’t have to make a commitment at this point; you are just getting informed about what is necessary to successfully sell your business. This section should answer a lot of your questions and help you through the maze of the process itself.

Okay, let’s assume that you have decided to at least take the first few steps to actually selling your business.

Before you even think about placing your business for sale, there are some things you should do first. Start with gathering all of your information about the business.

If you’re like many small business owners, you may have to search for certain documents. After you gather all of the above items, take a hard look at your financials and plan on spending some time updating the information and filling in all the blanks. Be sure to put all of your business information, files and reports in a neat, orderly format as if you were going to present it to a prospective purchaser. Keep in mind, everything for this sale starts with this information.

The big question is not really how much your business will sell for, but how much of it can you keep? The Federal Tax Laws determine how much money you will actually be able to put in the bank. How your business is legally formed can be important in determining your tax status when selling your business. For example: Is your business a corporation, partnership or proprietorship? If you are incorporated, is the business a C corporation or a subchapter S corporation? There are also tax rules that impact certain businesses on seller financing. The point of all of this is that before you consider a price or even selling your business, it is important that you discuss the tax implications of the sale of your business with your tax advisor or tax attorney. You don’t want to be in the middle of a transaction with a solid buyer and discover that the tax implications of this sale are going to net you less money than you expected or, worse, may cost you more in taxes.

Buyers buy businesses for many of the same reasons that sellers sell businesses

It is important that the buyer is as serious as the seller when it comes time to purchase a business. If the buyer is not serious, the sale will never close. Buyers who want to go into business strictly for the money usually are not realistic buyers for small businesses.

Here is a look at the make-up of the average individual buyer wanting to replace a lost job or needing to get out of a dead-end job situation. Chances are your buyer is educated with an entrepreneurial heart, possibly male, however, more women are going into business for themselves than ever before. Almost 50 percent of buyers will have less than $100,000 in which to invest in the purchase of a business. In many cases the funds, or part of them, will come from personal savings followed by financial assistance from family members and even SBA loans. The buyer will most likely never have owned a business before, so they will need a business with the systems and processes in place to allow them to manage and grow the business. When the business is structured well, many new business owners will buy a business he or she may have never previously considered.

Their primary reason for going into business is to get out of their present situation, be it unemployment or job disagreement (or discouragement). Prospective buyers want to do their own thing, be in charge of their own destiny, and they don’t want to work for anyone. Money is important, but it’s not at the top of the list; in fact, it probably is in fourth or fifth place in the overall list. In order to pursue the dream of owning one’s own business, the buyer must be able to make that “leap of faith” necessary to take the risk of purchasing and operating a business.

A new buyer needs to see cash flow.

This may be a bit premature if you not have decided to sell but it may help in your decision-making process to understand not only who the buyer is, but also what he or she will want to know in order to buy your business.

What about the Internet? The Internet is a real “buzz” word – and if its use is appropriate for your business, then developing a web site is important not only to your on-going business, but also to a buyer. Many buyers are conscious of what the Internet is doing for many businesses. If you have a web site for your business, it could be a big plus.

Here are some questions that you might be asked – and, should be prepared to answer:

The first thing to keep in mind is that the vast majority of 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 the profit and loss statement or tax return, as well as owner or family compensation. They will consider any excess compensation to employees and family. Buyers will also look at large, one-time expenses such as a new computer system or remodelling. They will consider non-cash items like depreciation and amortisation. 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.

Appearance – Value – Surprises

Create an Operations Manual for the business. You may already have one in place, or started one years ago, but now is the time to make sure it is up to date with the latest information and processes for your business. This will create added value and make the business easier to sell.

Preparing a manual on how to operate each segment of your business can also be helpful even if you don’t want to sell. It doesn’t have to be elaborate, just cover all the basics. Include anything to do with the business that might be helpful for a new owner to understand. However, don’t include anything that is proprietary or confidential such as customer lists, suppliers or secret recipes, etc.

Make a great first and lasting impression

Take a look at your business with a critical eye for detail. Put yourself in the place of the prospective buyer.  Are your financials in good order? Pay attention to how your business looks. Make sure your business is in the best position to get the highest offer possible.

Below you will find a few friendly recommendations that will help in our marketing efforts when you decide you are ready to sell:

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!