Five Steps to Successfully Selling your Business

You’ve thought seriously about selling your business but you really don’t know where to start. You have heard some horror stories about different selling processes, settling for less than what you really wanted but people get so far into the process that they can’t turn back. You’re not really big enough to hire one of the Wall Street investment bankers and you don’t know any reputable mergers and acquisition firms.

Does this sound familiar? Don’t despair, you are not alone. Most owners of small businesses with sales revenue ranging from $5 million on up to $100 million face these same questions and these same doubts. Hopefully the following tips and steps will help put your mind at ease and provide some direction as to what actions you may or may not want to take.

Tip #1 - Preliminary Assessment of Company Value

Preliminary is the key word here. Most owners have an idea of what their business is worth and what they would settle for if they decided to sell. Unfortunately, statistics show that most owners have an opinion of value that is generally higher than what the market will bear. So before you go off and hire that New York M&A firm or go to that seminar about selling your business talk to a business broker preferably one that reputable and well know, there are several well trusted business brokers to choose from, one of which is Sunbelt Business Brokers, they have been around for over 35 years and have a nationwide presence, just be careful their are a lot of independent broker and pretender that are not as honest as some of the big boys in the industry. Do some networking and you may find that you can get a preliminary valuation done for a much smaller fee ($1700 to $2500). Your business broker will be able to get the best price on a business evaluation due to the fact they have relationships already in place with valuation companies and have negotiated special pricing based on the volume of valuations they have done. This will at least give you a platform value and some knowledge to determine your next steps. (Email dan@ugoogle.com for more information on a preliminary valuation utilizing industry methodology)

TIP #2 – Have a Strategic Business Review Performed

You had a preliminary valuation done and you are comfortable enough to take the process to the next level. That means you need to have a strategic assessment completed. This can be performed by you as the owner and any family or confidant that you have in the business. However, it is recommended that you have an outsider perform this assessment. As owners working in the business on a daily basis, it is often difficult to see the broad scope of the organization in total. You need to know just how ready your business is for the selling process. There are numerous readiness factors to explore before you make that final decision to sell. Failure to go through this assessment and correct or compensate for any issues that may be uncovered can cost you hundreds of thousands of dollars in the selling process. You can have a strategic business assessment done by any number of wholesale distribution consultants. Prices will range from $5,000 up to $15,000 for this process. You may decide after reviewing this assessment that the time is not right to maximize share holder value by selling the company. It could make more sense to continue to grow the business by following the recommendations outlined in the assessment.

TIP #3 – Who is My Buyer?

You had an assessment, you put lipstick on the pig (fixed any issues uncovered) and now you decided to take your baby to market. Don’t jump right into the M&A arena and hire that big mergers and acquisition firm. Chances are very good that you already know who the buyer or buyers might be. Is it your biggest local competitor, one of the national firms, one of your suppliers or customers looking for vertical integration or could it be one of the many investment groups. Talk to your business broker, that is what they are there for! Take their advice, they do this for a living and have your best interest in mind. Keep in mind, broker don't get paid unless your business sells. This is a huge advantage to you the Seller.

TIP #4 – I’m Ready to Sell, What Now?

Whether you do it yourself because you know of numerous prospective buyers or you decide it’s too much hassle and look for professional M&A help, the next step is to create a comprehensive document, The Confidential Strategic Business Review Report. This document describes your company in detail. It includes recast financials. (Financials that are adjusted to create a realistic EBITDA taking out owner perks that would not be costs to a new owner) EBITDA is earnings before interest, taxes, depreciation and amortization. Acquisitions are often made as a multiple of EBITDA.

If an Business Broker represents you, preparation of a one-page Confidential Profile which highlights the acquisition opportunity without disclosing the name and location of your company is essential. This profile is used during the initial buyer/Investor contact phase.

TIP #5 The Basic Steps in Concluding a Sale.

Things are going to get both exciting and frustrating. Again, the following steps apply regardless of who sells your business but are primarily the steps utilized by an M&A firm taking your business to market. (Email dan@ugoogle.com for advice in selecting the right business broker for the sale of your business)