Q&A
Business Broker
When is the right time to sell my business?
The best time to sell is when your business is growing and thriving, which can be somewhat counterintuitive. None of us has a crystal ball to predict when something negative might happen, such as health issues, divorce, relocation, or economic downturns. Don’t wait until the passion is gone or sales plateau or start to decline. The best time to sell is when you’re at the top of your game.
Are there any tried-and-true strategies to maximize the sales price of my business?
Start planning for your exit long before you plan to sell. Ensure you have management and staff in place that have the knowledge needed to continue running the business once you’re gone. Set your business up for success and prepare for the sale by cleaning up your financial records and ensuring your business operations are on the rise. Be careful not to overvalue the business, as it could deter potential buyers and prolong the sale process. Lastly, it’s important not to underestimate the emotional impact of selling a business. This can lead to turning down otherwise fair offers, rushing to decisions, and even seller’s remorse.
How is the value of my business determined?
Depending on the size of the business, we look at the net profit for the past three to five years based on earnings before interest, taxes, depreciation, and amortization (EBITDA) or the seller’s discretionary earnings (SDE). EBITDA represents the profit without non-cash depreciation expense, amortization, taxes, and debt. SDE adds back expenses that represent the owner’s benefit, such as W2 income and more. Other factors taken into consideration that affect a valuation are comparable business sales, the value of the company’s assets, inventory, business longevity, employee tenure, competition, opportunities for growth, risks, and more.
Is selling my business as easy as sticking a for-sale sign on the front door?
Selling any business is a complex process that takes time, patience, a sound strategy, and a team approach. And that starts by hiring a qualified business broker. A broker will market the business for you and act as a gatekeeper, vetting viable buyers while managing the time-consuming task of fielding calls, emails, and requests for information. They protect the confidentiality of the sale so employees, customers, and competitors don’t find out, and they coordinate the negotiation and structure of the sale, facilitate due diligence, and keep all parties (CPAs, partners, bankers, attorneys, etc.) involved and on track throughout the process.
How long will it take to sell my business?
The time it takes to sell a business can vary widely. Factors such as the industry, size and condition of the business, market conditions, and comparables all come into play at the same time, and managing all of this takes time and preparation. That said, it can take an average of eight to nine months to sell a business. The new owner will also expect the seller to commit to a period of time after closing for a smooth ownership transition.
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