This business, as many others, began when I was bouncing ideas off my fiancée and some friends. An idea was hatched and a new baby business was born. The market was right and it grew, but not without a great deal of marketing, investment in training and equipment, and hard work.
After a number of years it was time to sell the business and move on to another endeavor.
Enlisting the help of my fiancée, an experienced business broker, we set about marketing my business for sale.
The only reason I mention this is I know what you as an owner will be or are going through when you are in the process of selling your company.
As the munchkin said in the “Wizard of Oz,” the journey begins with the first step.
Let's go through the preparation stage.
You may decide to sell you business on your own and hope this guide will help you on that course. I would suggest finding a good business broker. There are good business brokers, bad business brokers and ugly business brokers. (Sorry, couldn't resist.)
But you know as well as I that the bad are out there. My best suggestion is find one associated with a state or national association. Here in Florida, there is the Business Brokers of Florida http://www.bbfmls.com/ and the Florida Business Brokers Association http://www.fbba.com/. The national organization is the International Business Brokers Association http://www.ibba.org/.
These organizations provide training and support to their members as well as multiple listing services to get your business the highest amount of exposure.
Of course if you want to market your business there are internet marketing sites that you can list a business for sale.
One site is BizBuySell http://www.bizbuysell.com/. It may have been the earliest site and is used by business brokers and privately held company owners to expose buyers to businesses.
There are many in the same veil and a search of the web will give a host of similar sites.
Now that you have decided if you are going to use a professional or go it alone, it's time to move to the next step.
1. Prepare a packet of information for the buyer. This packet should contain, but is not limited to:
a. Profit and Loss Statement with balance sheet for year to date. That means from the first of the year until the current month. You should have received this from your Certified Public Accountant (CPA). Many sellers have these in their desk and don't know what they are or what they mean. Of course you do. These will have to be updated as the process continues. A business usually doesn't sell in a day.
b. Corporate, Limited Liability or Sole Proprietor tax returns for the past three years. Buyers purchase companies based on the financials.
c. A cash flow analysis. This a list consisting of your gross annual sales or revenue, cost of goods, gross profit and net profit. The net profit is then added to any perks, benefits, or nonrecurring expenses.
Nonrecurring expenses would be new office furniture, new air conditioning unit, etc. I think you get the idea.
d. Create an equipment list. Many of you have them and some don't. It needs to be up to date. Some buyers will request not only a list of equipment, but date it was manufactured and serial number. It is not a good idea to put a value on the individual piece of equipment but a total of all equipment on the list. Why? Because I say so, trust me or call your local business broker.
If you own a large business with a lot of equipment call me and I will list it for sale.
Seriously, there are companies that have certified machinery and equipment appraisers. An excellent source is NEBB Institute http://www.nebbinstitute.org/ This organization trains and qualifies machinery and equipment appraisers.
2. The next step. Now you have to decide how much to ask for your business. We had an owner call us and wanted to sell his business. After listening to him and gathering the basic information on his company and revenue and net profit numbers, we politely asked him what he wanted for his business. Every buyer has a number in their head. It was netting very low numbers to the owner. We asked and he said he wanted $3 million dollars. “What?” we asked? $3 million? How did you come up with that number? “That's what I want!”
My point is to evaluate your numbers and come up with a reasonable sale price or it WILL NOT SALE.
Your CPA can help if they are familiar with acquisitions and sales of businesses and they are out there. But many will give the owner a false sense of what the business is worth and you will sit on the business, while you would prefer to sit on a beach in a tropical island. The situation is to call the business broker or (you see I always give you an out) there are business valuation companies that will gather all necessary information and give you a written valuation of your company's market price.
The caveat is they are usually a little expensive, but you have a nice packet to hand to the buyer.
3. Next step. Look around your office and/or plant. Is it clean? You have been working here for years and after a while of working hour after hour, you get accustomed to the way the place looks. Time to step back, look at it through new eyes or grab someone off the street and ask them to look at the office, the plant, the carpet, the walls and even the ceiling, could they be cleaner? Maybe time to change carpet, take the Playboy pinups off the walls.
These days, real estate sellers are hiring staging professionals to evaluate and make suggestions on changes in décor. Let me tell you a little tale that is true.
A business owner in Tampa had a janitorial supply company that he wanted to sell. It was located in a warehouse. He was a salesman and knew there had to be some changes in order to sale his business. A complete renovation of his office overlooking the warehouse and the buyers fell in love with the office and purchased the business on the spot. The power of seeing themselves in the business!
Come back and we will have more information. This is a start. There is so much.
Sale Of Business Agreement
In selling a business, you can learn how to avoid the three mistakes that will literally cut the sales price of your business in half. Think about having a business that should be worth $750,000 but only being able to sell it for $375,000.
There are 700,000 businesses that will come on the market and change hands every year. That number represents 30% of 2,500,000 businesses that owners will want to sell every year. 70% of the businesses do not sell. Many of those end up being liquidated for lack of a buyer.
If you do not pay attention to three factors in selling your business, you literally may only receive half of what you should get.
1. Not Understanding the True Value of Your Business.
Albert wants to sell his business that has a ten-year track record. The business provides Albert an income of $150,000 per year in the retail area. Albert has done his own valuation of what he thinks the business should sell for and wants a price of $1,500,000 for the business. That price is a factor of 10 times the net income. Unfortunately, in the retail sector of Albert's business, the going rate is a multiple of three times the net income or $450,000.
Because of his unrealistic price, Albert will not be able to sell his business.
2. Not Understanding How The Sales Proceeds Will Be Taxed When Received.
Janet owns a business in a corporation. The sale is proposed to her as a sale of assets and no assumption of liabilities. Although the sale of assets will be treated as a long-term capital gain at the corporate level, she has not considered how she will get the money out of the corporation and into her hands personally. Unfortunately, she has also signed the Purchase and Sale Agreement without consulting her attorney or her accountant. How much tax will she have to pay?
There are a number of options that could have been considered on how to structure the transaction. Unfortunately, you have to game plan and run the numbers on all of the options BEFORE you sign the purchase and sale agreement. Some owners have actually unintentionally structured transactions by not planning advance with the result that they were taxed at ordinary income rates rather than long term capital gains rates!
3. Business Owners Selling Must Follow The Boy Scout Motto ? ?Be Prepared?
After working for twenty-five years, two owners decide that they want to sell their business and retire. They begin working less and have not trained anyone to do the technical things that they do so well. Of course by working less, less technical tasks get fulfilled and less income rolls in. The best preparation would be to sell before income goes down and better yet have installed the six systems that literally double the value of your business.
One needs to begin preparing to sell a business probably years before the business is sold or even offered for sale. There are six systems that every business must have. Without them, the business is not an investment that buyers drool over.
This test will tell you whether your business has those systems:
1. If you take off all of next week and do nothing in your business, what will happen to the income of the business?
Increase Decrease Unaffected (Circle one)
2. If you take off all of next week and do nothing in your business, what will happen to the flow of new business?
Increase Decrease Unaffected (Circle one)
3. Do you have a written business continuity plan? Yes No
4. Do you have videos or audios of your plans for the business over the next three years? Yes No
5. When someone calls your office to schedule an appointment, does someone different answer the phone and/or do they have a set script to use to answer the call and close the appointment? Yes No
6. Who is your favored buyer for your business?
___________________________________
Do you have a name ready or do you have no clue whom the buyer would be?
7. If you do not come back from your next appointment, ever, who will sign checks at your company?
____________________________________
8. Will your death cause your company's lines of credit to be called due?
Yes No
9. Do you have a checklist to be followed if you are suddenly disabled and unable to care for the business? Yes No
10. Are you ready to learn how to implement the necessary steps for an effective exit strategy? Yes No
Both Gregory Colvin & James Montgomery are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Gregory Colvin has sinced written about articles on various topics from . Gregory Colvin is a business broker in Tampa, Florida. As a prior business owner, he knows what business owners go through and lends his knowledge to sellers. Acquisitions Unlimited Inc. 813-920-7880 Website: http://acquisitions-unlimited.com/. Gregory Colvin's top article generates over 2400 views. to your Favourites.
James Montgomery has sinced written about articles on various topics from Motorola Cell Phone, Finances and Mortgage. Jim Montgomery is a successful business owner, author, and law firm owner in San Antonio, Texas. He helps people buy and sell businesses plus develop exit strategies through their own business to get what they want from life. For detailed free information. James Montgomery's top article generates over 12100 views. to your Favourites.
