You’ve decided it’s time to sell. Now what?
You invested your time, money, and energy to build, run, and operate your business. It may well be your life’s work. If you have already decided that now is the right time to sell, working with us can help you get what your business is worth. Below you’ll find information on topics sellers frequency ask us about.
What is my business worth?
It doesn’t make any difference what you think your business is worth, or what you want for it. It also doesn’t make any difference what your accountant, banker, attorney, or best friend thinks your business is worth. Only the marketplace can decide what the value of your business is. But we can help you enhance the market’s perceived value of your business.
What information do buyers want to see?
Here’s a checklist of the items you should get together:
☑︎ Three years’ profit and loss statements
☑︎ Federal Income Tax returns for the business
☑︎ List of fixtures and equipment
☑︎ The lease and lease-related documents
☑︎ A list of the loans against the business (amounts and payment schedule)
☑︎ Copies of any equipment leases
☑︎ A copy of the franchise agreement, if applicable
☑︎ An approximate amount of the inventory on hand, if applicable
☑︎ The names of any outside advisors
why do buyers want to buy a business?
- They’re laid-off, fired, being transferred (or about to be any of these)
- They’re taking early retirement (forced or not)
- They don’t like their jobs
- They want more control over their lives
- They want to do their own thing
what are the traits of buyers?
Almost half of all buyers will have less than $100,000 to invest in the purchase of a business. In many cases the funds, or part of them, will come from personal savings of from family members. The buyer may never have owned a business before, and most likely will buy a business they have never considered previously.
Their most common reason for going into business is to get out of their present situation, such as unemployment or being unhappy in their jobs. But prospective buyers must be able to accept the risk of purchasing and operating a business.
what do buyers want to know?
- How much money is required to buy the business?
- What is the trend in your business, the annual increase in sales?
- What is the value of your on-hand inventory?
- What is your debt?
- Will the seller train and stay on for awhile?
- What sets your business apart from your competition?
- What can be done to grow the business?
- What can the buyer do to add value?
- What is the profit picture in bad times as well as good?
What is the buyer’s primary focus?
The majority of buyers want to buy cash flow. So, meet with your accountant or bookkeeper and begin to get your financial statements in order, with your main attention on determining your cash flow. Cash flow is not the same thing as profit. You can add back expenses that the buyer will not have to pay, such as:
- Excess compensation to employees and family
- Large, one-time expenses such as a new computer system or remodeling
- Non-cash items, such as depreciation and amortization
- Interest on loans
These are items that we look for when advising our sellers.
what can I do to prepare?
- Identify the things that add value to your business. Promote the value of customer lists, proprietary products and techniques, well-maintained equipment, secret recipes, customized software programs, and good employees.
- Eliminate surprises. Analyze your business. Solve the burning problems you identify.
- Document your standards of operations. This will impress buyers that you have your business act together and should help you sell more quickly. Prepare a collection of ads that you have placed in a catalog or sample of products, publications, or menus (if the business is food related.) Include anything to do with the business that might help a new owner. However, don’t include anything that is proprietary, such as customer lists, suppliers, or secret recipes.
How should I maintain my business during the sale?
- Clean the outside of your place of business.
- Repair non-operating equipment or remove it if you are not using it.
- Remove items that are not included in the sale and unnecessary items, especially if inoperative.
- Maintain inventory at normal levels.
- Repair signs, replace outside lights, replace the carpet, paint the place
- Keep normal operating hours.
- Spruce-up the inside of the business, etc.
Do you have other questions?
Please visit our Selling FAQ to answers to the following questions:
- How long does it take to sell my business?
- What can business brokers do – and, what can’t they do?
- What can I do to help sell my business?
- What happens when there is a buyer for my business?
- Why is seller financing so important to the sale of my business?