Selling

Many business owners mistakenly believe that they will not be able to find a buyer for their company. As a result, they often opt for liquidation as the quickest way to sell. However, this typically leads to fire-sale prices and gives the business no value.

Many business sellers choose to put their company on the market because their lease is up for renewal and they do not want to obligate themselves to another long-term contract. However, this often results in them closing their doors and not realizing any financial benefit from the customer base they spent years building.

It is not uncommon for a business owner to want to sell but have no plan for what they will do afterwards. One option may be to sell and walk away completely. However, many times a buyer will want the seller to remain involved in the company, either in a managerial capacity or part-time. All of these transitional factors need to be considered and discussed prior to marketing your company for sale.  

Some options for selling your business may include selling to an existing partner or employee, selling to another business, selling to an individual moving into the area, transitioning the company to next generation family members, selling to a key employee, selling to all of the employees as a group, or finally liquidating your business and closing the doors. All of these options have benefits and disadvantages that should be considered before making a decision.

Consulting with a professional business broker is recommended to explore all of these options and weigh the benefits and disadvantages to find the best option for your particular situation.

There are three primary factors that affect the value of a business: size, growth, and leverage.

• Size: Investors pay more for shares of a larger company. The same can be true for buying businesses. Bigger companies can sell for higher multiples.
• Growth: This is the buyer’s reasonable expectation for future growth. It’s determined by the relevant growth history of the business compared to the relevant growth history of the market.
• Leverage: The ability of the business to borrow. This reduces the seller’s risk of carrying a note and can increase the value of the business.

Profitability and turnover are two important factors to consider when valuing a business. A business may have high revenues, but if margins are low, profits will be low as well. Additionally, the ratio of assets to annual revenue is important to consider. If a business has high assets, but low revenue, it may not be valued as highly as a business with lower assets and higher revenue.

You might be wondering why it is so important to keep your business sale confidential. Let me explain. If word gets out that you are selling, it can potentially disrupt your relationships with customers, suppliers, employees, and creditors. Additionally, buyer prospects may be less interested in a business that has been publicized. Therefore, it is in your best interest to keep the sale under wraps and continue running your business as usual.

It is important to consider all potential motivators and factors when making the decision to sell your business. Some may be personal, such as boredom or burnout, while others may be practical, such as the need to earn more money. Whatever the reasons, it is important to be sure of your motivations before making any decisions.  

There are several reasons why you might want to sell your business. Maybe you want to diversify your portfolio or alleviate financial problems. Often, though, the most common reason is simply that you want to retire.