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Selling a Business in 2018

For Sellers Sell Sell a Business Selling Selling a business

Posted by Jennifer Hendrickson on

One of questions I’m asked most often is:  How does one go about selling a business?  The short answer is this:  Carefully, and with help from several places.  The starting point for selling any business is to engage a trained business broker who will examine and value your business, find a suitable buyer and guide you and the buyer through the entire transaction.  Your attorney will advise you on the legalities of a transaction and your accountant will advise you on any tax implications.  The long answer is different for every business.  Here are some of the most common follow-up questions we hear every day:

How soon should I begin developing an exit strategy?

It’s difficult to start too early and easy to start too late.  The most savvy business owners that get top dollar for their business plan their exit several years in advance.  In fact, we work with companies to position their business for sale over the next 2-5 years.  If you want or need out in six months we can do that too - just be ready to accept a lower price than you might get if you allowed more time for us to find a motivated buyer.

What is the most important factor that drives the sale price?

It’s all about cash flow.  Selling a business is vastly different than selling a house because, unlike home buyers, business buyers are rarely interested in fixer-uppers.  Your assets certainly have value as collateral that can secure a loan (especially any attached real estate), but cash flow is king when determining a sale price.  You may wonder if you can simply apply a multiple to your earnings and arrive at a sale price…probably not.  Our proprietary valuation methods will recast your financials and consider the actual sale prices of other businesses like yours, similar to comparables in a real estate appraisal.  Most business owners have unrealistic expectations about what their business is worth (either on the high side or the low side).  The only way to know for sure is to have a professional valuation by a qualified and experienced business broker.

How do you find buyers for a business?

Most business owners are surprised to learn that interested buyers outnumber sellers by approximately 100 to one.  We present your business throughout the United States and Canada through all the Murphy Business offices and a network of high-impact websites.  Business brokers in the Murphy Business network all collaborate to match buyers and sellers.  No one keeps their portfolio of available businesses or interested buyers to themselves.  Our experience shows that less than half of business buyers are found locally – you need us to look nationally for buyers.

Whatever your exit timeline may be, remember this:  Don’t tell anyone (except those I mentioned in the first paragraph) that your business is for sale!  Not even your kids.  It’s one of the fastest ways to wreck a perfectly good business.  If word gets out that you’re even thinking about selling, your employees will get nervous and start looking for new jobs, customers will speculate that your warranties are no good and negative buzz will hang a dark cloud over your business – all things that will decrease your cash flow and devalue your business.  We will market your business confidentially and no one will know it’s for sale until it’s already been sold.

If you own a business and would like to sell it to someone someday, contact us for a confidential, no-obligation consultation for which we charge nothing.  We’ll take the time to learn your wants and needs and then help you determine the best course of action.