Posted 12-15-2010 2:47 pm by
Thinking about selling your business?
The business you worked so hard to develop and have come to love? The hardest decision after starting a business is deciding when it is the right time to sell. Your business may just be a yellow pages listing or a tax ID number to someone else, but to you, it represents a lot more. Your business is born out of an idea and brought by hard work and perseverance. The value of the company has grown as you have personally put your heart and soul into it. Now you're thinking about your next move, selling your business and extracting that value.
There is no such thing as a perfect time to sell your business. A lot of businesses are never sold. Some businesses literally die when the owner dies, mostly due to the reason that a succession plan was never put into place.
Businesses are like stocks in the stock market. They rise and fall in value as interest in the company or its products rises and falls. Many business owners have refused to sell when their business was at its peak, only to find themselves selling the business later because they have to in order to pay off debts.
The most ideal time to sell your company is while it is still relevant to the marketplace, profitable, and still has future growth prospects that can be used to leverage a higher price. Waiting too long in a business cycle to sell will certainly reduce the number of bidders and potential profits. The most common hindrance to identifying the right time to sell is the value. You can believe that your company is worth a lot more than it is because quite honestly, it is worth more to you. However, keep in mind that a potential buyer is not swayed by your emotional connection to your company or the history of your business becoming successful.
What are some good reasons to sell your business? Sometimes things happen and you just have to get out. Other times you're just ready for a change of pace. Your enthusiasm to build and work the business isn't there anymore. Ask yourself if you are still at least 75% as enthusiastic about building the business as you were in year one or two when you started.
You need to have a plan in business; a plan for starting a business, a plan for running a business, and a plan for ending a business. The plan for ending your business should be flexible and should be inclusive of current and future market conditions. Your business should be sold while its products, services, and business model are still relevant and the most number of potential buyers are interested. If you wait to unload your business because you have to, it will never be a successful plan. If you are like a lot of people, you have done your best in the business for three or more years and don't have the desire to make it any bett er or you really are ready to move on to the next business you want build. Maybe it's time to retire. That is also something you have to ask yourself every year that you're in business.
Some reasons to discretely put your business on the market and attract a buyer may be: You found something more exciting to be a part of, the business is no longer satisfying to deal with every day, You want to retire, it's built up enough to cash out, and/or you are bored of the business. The best time to sell a business – believe it or not – is when it's making good money and you don't need to get out.
The worst thing you can do is value a business yourself. The next worst thing is to ask your accountant. You and your accountant will figure out some way to paint the best picture possible and then get mad at the fact that it will not sell for that price. You love what you built, and your accountant loves your cash. He doesn't want to make you mad. A key ingredient in the pricing will always be missing. If you do not have experience in the marketplace for your industry and area regarding business sales, you will never put that factor into your selling price.
Buyers will always value lower than sellers, but given the ability to completely name their price, sellers will be way off the charts on their thought of the value.
A company with revenues over $50 million and/or many big assets (like manufacturing equipment) should use a business appraiser to give them the true value. Any smaller business is best to use a person in the buy/sell industry like a business advisor or business broker. Do not use a real estate broker whatever you do. This also includes a commercial real estate broker. They deal with buyers of buildings and houses, not businesses.
If you have a business with a building, have a real estate person appraise it then get a business broker to help sell it. This way you have true business sales experience on your side and you only pay commission for the business sale, not the building. A business broker will cost more, but if you have a viable business, it will get sold and it's worth the money you pay. Especially since the commission can be built into the price so that you really don't pay a lot out of your end.
When you sign up with a real estate broker, they tie you into an exclusive contract and then advertise your business as cheaply as possible. They don't sell businesses so they don't have buyers and they don't want to spend the money to find qualified buyers in places where they are actually looking (the newspaper is a terrible way to sell a good business). They make a living selling houses and building. Get help valuing and selling your business from professionals if you have pride in your company.
Unless you're extremely happy with coming to work every day at your business, consider selling it to a h ighly motivated, highly qualified buyer and moving on to the next big venture. If you are not ready to sell, get a valuation done anyway to see where your business stands in the market. You may find it is worth enough to consider selling or you might find out that some more work needs to be done to be ready to sell in the future.
AARON MULLER| ADVANTAGE COMMERCIAL BROKERS
BUSINESS BROKER, COMMERCIAL PROPERTY SPECIALIST
DIRECT: 425.766.3940
FAX: 425.882.2547
CHECK OUT MY LISTINGS AT www.acbrokersinc.com
