Maximize business sale value through our 14 tips for business sellers. You will only sell your business once so you want to do everything that you can to leverage a profitable sales price.
Business owners are concerned about selling their businesses. They worry about not getting enough in the sale of their business. Many factors influence the price at which a company will be sold such as the desirability of the business, financing, consistency of earnings, etc. Sellers can help improve their chances of maximizing their business sale value by following these 14 tips.
1. Determining Your Business Value
You need to determine the actual value of your company before you can list it for a better price. It is important to examine the financial situation of your business before you can estimate how much it might sell for. At a minimum you will want to look at the company’s tax returns for the past three years and the current profit and loss statements. They play an important role in determining the value of your business. We don’t recommend that you overprice your business. However, we recommend listing it for the full value if your goal is to sell faster.
Buyers will also want to know the income and source of the funds for the company. You need to be able to show potential buyers what you are selling to get them to buy your business. To get your business sold at the best price, you will need to provide more details to the buyers.
Seller’s discretionary earnings is the formula used to value small business for sale. Cash flow includes profit, the owner’s salary and any perks or benefits the business owner receives. These include their car, insurance and retirement plans. There are also discretionary costs that may not be required by the business, such as travel for entertainment and optional travel for owner.
Higher cash flow is usually a sign of a better business. It is important that you identify every item in the discretionary cash flow of an owner. Buyers will be more inclined to invest in your business if you make more profit.
2. Evaluate Strengths, Weaknesses, Opportunities, and Threats (SWOT).
You can sell your business at the highest possible price by assessing its strengths, weaknesses and opportunities. Let’s take a look at these and see how they affect the value of your company.
The Most Prominent Factors of Your Business
It is important to find the unique strengths of your company. Your business will sell best if it has unique aspects that are not available to others. Why are people choosing to do business with you? These strengths could be transferred to a new company owner. These strengths can be manipulated by a new owner to enhance and build upon. Also, these strengths might help you attract the right buyers. People who can pay higher prices for your business are more likely to be interested in it.
The Fragile Aspects of Your Business
Although it may sound strange that you identify your weak points to help sell your business at a higher price, let us explain. Imagine that you are the best product in the world, but lack the sales skills to expand your business. If a larger company already has a sales staff, they may see this opportunity as a way to grow your company and will pay more to purchase your product.
There Are Many Opportunities For Your Business
Your company may have opportunities to expand and become more financially profitable based off your strengths or weaknesses. Perhaps you own a successful business in a particular region. Potential buyers may be interested in the possibility of growing your company to a larger scale. Your business’s value can be ten times higher if this happens. This can help you sell your business for more than just the asking price.
What Might The Threats be From Others
Your business’s value can be affected by perceived threats. It is important to know how you can counter any potential threats. If you have a limousine company, potential buyers may be worried about Uber or Lyft. You can increase your potential sale price by highlighting things like customer satisfaction and service quality, as well as long-term customers who aren’t interested in booking online.
3. Maximize Business Sale Value: Find the right business broker
Your most significant transaction may be selling your business. Hiring a Business Brokerage that is experienced in selling companies within your sector will help you sell your business for the best price. They will be able to market your company more effectively, correctly position it, and communicate in the industry language. You will get more buyers and this is exactly what you need to increase your company’s selling price.
4. Right pricing for optimizing value
Proper pricing is essential to maximize the company’s sale price. You can lose money if you set it too high which can lead to people being less likely to be interested in it if you price it high. It is best to set the price a bit higher than what you get from similar companies. You can negotiate and may get the entire price if you have enough interested buyers.
5. Maximize Business Sale Value: Quietly market your business
A great marketing strategy is essential for selling a business at the best price. While you would like to sell a business to as many people as possible, it is important to protect the confidentiality of your sale. Customers and employees won’t be able to find out about the sale before it is complete and become concerned. A skilled business broker can write ads that bring in qualified buyers. This allows you to focus your efforts on those buyers most likely to offer a fair price and to have the finances to close the deal. The top business brokerages will promote the company through many avenues including email marketing and social media.
6. Consider your best potential buyers
Your best offers may not always come from within your industry. There are some businesses where you have to have specialists but many small businesses don’t require specialists. In fact, many are run by absentee or semi-absentee owners. As long as they are open to staying on the job after you sell, the buyer or the manager you hire can help you run the company.
7. Offer a transition period after the business sale
You must provide a transition period for all buyers in order to sell your business at the best possible price. They will need you to continue to meet with customers and employees. The buyer’s needs will dictate the length of any transition period. It doesn’t matter what you do, as long as the buyer is satisfied with your services. The transition period will end and the original owner will have to step down. Someone will be required to take over these roles in the company. The best way to sell your business is by training new owners.
8. What is the owners job within in the business
The ideal scenario is that the job of the seller can easily be replaced. It makes the transition easier and reduces the chance that the buyer can take over the role. This makes selling your company easier and helps you to be available for your customers when you’re not there. A bonus is having department managers and salespeople who can manage customer relationships. When it comes time to sell your business, this will help increase its value. With the majority of businesses, the owners are more involved with the important aspects. This will usually mean a longer transition period.
9. Maximize Business Sale Value: Be transparent
You can increase the trust potential buyers have about your business by being more transparent with details. This will help ensure that your business is successful in the future. It is also important to build good relationships with potential buyers in order to improve the quality of their offers. Buyers want to feel like they can understand the business, work with you in a transition, and build upon your company’s successes after you leave.
10. Maximize Business Sale Value: Communicate consistently with all key individuals
Communication is key in any relationship. This includes potential buyers as well as advisors such your accountant, attorney and business broker. It will build trust and help you overcome obstacles to achieving the highest possible value for your business. Stay in touch with everyone regularly. Smooth out conflicts. Minimize errors by confirming information and requesting clarification as needed
11. The good problem of multiple offers for your business
Knowing that others are also interested in the same thing is what drives people to be interested in it. Your Business Broker should have a plan for marketing to attract many buyers, no matter if they are looking to buy a high-end item or build a business. Potential buyers should be made aware that not all are interested in purchasing the business. It will give buyers a sense that there is urgency. This will help them move forward, and they will know that other potential buyers will do the same. Multiple offers can be leveraged in negotiations, and will go a long ways in maximizing the company’s value.
Multiple offers can help you get your asking price or higher. It is important to understand the terms of your Business Brokers offers because It’s not always the most attractive offer. The offer’s structure and buyer are also important. What amount will you pay at closing? How much after closing? Is there any condition to the deal, like the buyer needing financing? How likely is it that the buyer will receive funding? What amount of due diligence will be required. What length of time will the buyer have to conduct due diligence? Do you feel comfortable with the idea of a buyer buying your company?
After you have analyzed the offers you will be able to decide with which buyers you want to negotiate and the price or amount you are most concerned about at closing. An experienced business broker can negotiate on your behalf to ensure that you get the highest price and best terms possible for your sale.
12. Due Diligence
Due Diligence should be completed as efficiently and quickly as possible. You need an accountant who is available and able to provide all documents as well as communicate effectively with the buyer. Our business brokers have experience will know the typical due diligence process and be able to negotiate differences regarding the length and expectations of due diligence.
Maximize Business Value with Mission Peak Brokers
At Mission Peak Brokers we focus on the sales of Liquor Stores, Gas Stations, Restaurants, and SBA Loans. To maximize the value of your business sale, we attract the best buyers by marketing your business vigorously.