Paramonos Business Brokers

Selling Your Business

Introduction

Selling your business is a detailed and complicated process. Careful planning and attention to even the most minute details are required to make sure that the sale is approached with the same care and consideration that helped build your business. To assist in the complicated selling process, we have developed this whitepaper. With this complete guide to selling your business, we will outline all the information you need for a smooth and successful sale.

Preparing to Sell

Determining why you are selling your business is the first step to successfully preparing your business for sale. Whether it is due to retirement, personal relocation, family considerations, illness, or the desire to move on, knowing the reason can help structure the most advantageous transaction for both the seller and the buyer. After you have identified the reason, there are some concrete steps we have identify ed that will result in a successful transaction.

 

Paramonos Business Brokers 980 297 3308 G.Daniels@gabrieldanielsfe.com

 

 

1. Compile your financial books and business records.
Buyers want to see proof of the business sales, profits, and other data, including the terms of the lease if you have one. Having this information ready before the sale process begins is a big advantage when prospective buyers begin asking questions about your business.

2. Establish a reasonable price and terms of sale.
When you are trying to attract buyers, making sure your business is competitively priced for the market is vital. Overvaluing and undervaluing can jeopardize a potential sale, as can having unreasonable terms of sale. Getting an appraisal on the business is the best way to go. An appraisal creates an official document that the buyer can reference to ensure competitive pricing.

3. Collect lists of assets.
As you are preparing for the sale, walk through all the assets of the business. This includes everything from furniture and office supplies to inventory and equipment. A fully itemized inventory can be referenced during the inspection process which can help make the sale go smoother.

4. Appearance counts!
Make sure your business is neat and clean. Consider hiring a professional cleaning crew before you start showings. Curb appeal matters just as much in business sales as it does in home sales. Ensuring that both the outside and the inside of the business are clean and orderly can make it more attractive to buyers.

5. No surprises.
The last thing a potential buyer wants to hear after they make an offer is that the landlord is hard to work with or that there is an outstanding loan on the business or that health, tax or zoning regulations have been violated. Make sure to address any potential issues before you start advertising the business.

Whitepaper on Selling Your Business

Paramonos Business Brokers 980 297 3308 G.Daniels@gabrieldanielsfe.com

 

 

6. Hire a business broker.
Why use a business broker? The process of selling your business is complicated and detailed. The amount of careful planning, data gathering, regulations, and more can be made much easier with the assistance of a business broker. Using a business broker will not only make the process easier for you, but it will also help ensure that the sale of your business gets the care and consideration it deserves. PARAMONOS Business Brokers’ staff has the experience and dedication to quality service that you need when selling a business.

Stay on Track During the Sale

There is no doubt that selling your business can result in a million questions. Staying on track during the process can be di cult, especially when you are still running your business. This is one of the reasons we recommend using PARAMONOS Business Brokers. We will handle all aspects of the selling process so you can focus on your business. But to assist you in staying on track, we have six strategies that will help.

1. Price the business at fair market value.
Buyers are looking for a win-win scenario. While buyers do want to see a thriving and successful business, if that business is priced sign cantle above fair market value, substantially fewer buyers will be willing to pay the high price.

2. Maintain on denasality.
The process should stay between the buyer and the seller. That’s it. Keeping the ins and outs of the selling process con denial will not only make the buyer feel more secure, but it will also ensure that the operations of the business remain undisturbed.

3. Do not sell impulsively.
Making a rash decision when it comes to selling your business can be disastrous. Plan ahead and plan accordingly. This is where a business broker can come in handy. They will ensure that the deal is done within the proper timeline and with careful consideration.

Whitepaper on Selling Your Business

Paragons Business Brokers 980 297 3308 G.Daniels@gabrieldanielsfe.com

 

 

4. Anticipate the buyer’s requests.
Do your due diligence when it comes to appraisals, machinery maintenance records, inventory, and more. Having all of the information your buyer may ask for is a solid way to ensure that the business sale goes smoothly.

5. Focus on the deal’s structure.
In many cases, the deal structure can be more important to the buyer than price. Work with your broker in advance to ensure that you understand what should go into the structure of the deal.

6. Be exile.
There is always some give and take in business dealings. You should be willing to negotiate, within reason, with the buyer. Having some edibility can make all the difference to a buyer offering a deal and closing on it.

Whitepaper on Selling Your Business

Paragons Business Brokers 980 297 3308 G.Daniels@gabrieldanielsfe.com

 

 
 

The Selling Process

When you are going through the selling process, there are a few things to keep in mind. From advertising and marketing to negotiation, every step of the process is important to close the sale.

Positioning

When you are positioning your business, you have to consider a number of areas. Make sure you take into consideration the asking price, down-payment, financing, non-compete agreements, and training. The offerings in a selling package can help attract qualified buyers for your business, so the proper positioning is very important when creating a deal structure.

Advertising and Marketing

Lack of proper exposure is one of the major reasons business sales fail. Getting the proper exposure for your business during the sale is a vital part of the selling process. The Internet, newspapers, professional networks, and listing services can all help with exposure. Business brokers can also be helpful with this aspect by leveraging their professional connections to qualified buyers through proper exposure.

Buyer Screening

There is a distinct difference between a “business looker” and a “business buyer.” Ensuring that the buyers who are looking at your business are able to purchase it helps separate the qualified buyers from the unqualified. Requiring potential buyers to sell non-disclosure acts before giving them more information about the sale, prevents people posing as buyers just to inform your competitors of the sale. Financial screening and qualification ensure that the buyers looking at your business are financially able to purchase and therefore prevents you from wasting your time on an unqualified buyer.

Whitepaper on Selling Your Business

Paramonos Business Brokers 980 297 3308 G.Daniels@gabrieldanielsfe.com

 

 

Introduction and Follow Up

Business brokers can be especially helpful in this area. By introducing the business to potential buyers and offering consistent follow-up, brokers can take the usually highly emotional and delicate process of buying a business and make it easier for potential buyers to overcome any issues and address concerns.

Negotiation

As with any business deal, selling a business requires negotiation. Having a deal structured with room for negotiations can help facilitate an easy and lucrative sale for both the buyer and the seller.

How Do I Know What My Business Is Worth?

Business valuations depend on a wide variety of factors. Because each business and business owner are different, there is not set guide to business valuation, however, we can walk you through some initial details to help with the process.

Small to Mid-Sized Business

If you are selling a small to mid-sized business, your valuation typically depends on four factors: 1. Seller’s Discretionary Earnings (SDE)
2. Risk
3. Terms of Sale

4. Industry

Each of these factors are calculated using some specific categories, so we have broken each factor out to help you better understand valuation.

Whitepaper on Selling Your Business

Paramonos Business Brokers 980 297 3308 G.Daniels@gabrieldanielsfe.com

 

 

Seller’s Discretionary Earnings: The total cash ow benefiting the owner is known as the seller’s discretionary earnings or SDE. SDE is determined using the following factors:

1.            Pro t or loss as reported; 

2.            Owner’s salary; 

3.            Discretionary expenses; 

4.            Non-reoccurring expenses; 

5.            Noncashexpenses; and 

6.            Expenses not included in pro t and loss. 

After these categories are added together, a multiplier between one and ve (or more) is applied to calculate SDE.

Whitepaper on Selling Your Business

Paramonos Business Brokers 980 297 3308 G.Daniels@gabrieldanielsfe.com

 

 
 

Risk: The second valuation is the level of risk of the business. Categories used in determining the risk include:

1.            Years in business with current owner; 

2.            Profit trend; 

3.            Quality of books and records; 

4.            Franchise membership(inapplicable); 

5.            Brand recognition/strength; 

6.            Level of competition; 

7.            Dependence on current owner; 

8.            Diverse cation of customerbase; 

9.            Lease length and terms; and 

10.        Asset value. 

Terms of Sale: The terms of sale are the one business valuation factor that the business seller can control completely. Categories in the terms of sale include:

1.            Down payment; 

2.            Interest rate; 

3.            Monthly payment; 

4.            Non-compete agreement; and 

5.            Training. 

Many sales require the seller to provide a certain level of financing to the buyer. This financing allows the seller to receive a portion of the purchase price at the time of sale, and the remainder over a number of years. Having mutually beneficial financing options makes a business more attractive to a potential buyer.

Whitepaper on Selling Your Business

Paramonos Business Brokers 980 297 3308 G.Daniels@gabrieldanielsfe.com

 

 

Industry: The health of a given industry can make some businesses more attractive than others. Categories that determine industry valuation include:

1.            Ease of operating the business; 

2.            Location; 

3.            Facilities; 

4.            Employee relations; 

5.            Operating hours; and 

6.            Growth potential. 

All of these factors determine the overall value of the business. Miscalculating one area can result in an overvaluation or an undervaluation and cause the sale of the business to suffer. Due to this, it is always best to have a professional business broker walk through the valuation with you.

Have an Exit Strategy

Many small and mid-sized business owners do not have an exit plan. Not having a formal plan can severely damage a business if it is hit by a sudden crisis like an illness, family concern, rapid market change, or other issues. Before you start the process of selling your business, develop an exit strategy so you can be fully prepared to sell the business.

Here are the questions you should answer to develop an exit strategy:

1.            What are my preferred options and timing for leaving the business? Take into consideration if you are okay selling to an outsider, if you want to sell to a friend or family member, if you want to merge or want a buyout from a competitor. 

2.            What family members are involved in the business and what are their objectives? Will they leave when you leave or do they plan to stay? 

3.            What are your financial objectives? 

Whitepaper on Selling Your Business

Paramonos Business Brokers 980 297 3308 G.Daniels@gabrieldanielsfe.com

 

 

  1. What are your retirement plans and goals? 
  2. What is the value of your business at present? 
  3. What has to happen to increase business value and how do you position it for sale at the best after-tax rate? 
  4. What has to be done to properly manage estate, trust, and tax concerns you will face during retirement and beyond? 
  5. What has to happen to ensure the business continues in the instance of owner departure, death or incapacitation? 
  6. Who will replace the owners upon departure and will they need special training, licensing, 

An effective exit plan is situated on a timeline and should be updated often as changes happen in your life, family, finances, goals, and more. A business broker can assist you with developing a comprehensive exit plan and make sure that the sale of your business is executed properly.

Why Choose PARAMONOS Business Brokers?

PARAMONOS Business Brokers has successfully sold 100s of businesses. We have been in continuous operation since 1979 and are experts at maximizing the value of your business. PARAMONOS can ensure that your business gets maximum exposure to attract the best and most qualified buyers. Our extensive network can make all the difference during a sale. We will save you time and limit your stress as we navigate the details and negotiations for you. We are committed to providing you peace of mind during your business sale. We offer unparalleled service and are committed to making your business sale go as smoothly as possible.

If you have any further questions or are looking to sell your business, contact PARAMONOS for a no- obligation estimate!