Let Us Help You Sell Your Business
The best way to sell your business.
Selling your business can be complicated on both emotional and logistical levels. You have put in an extensive amount of time, effort, money, and sacrifice to grow your business, and the process of selling it is complex as well. Though each business sale is different, many steps in the process are relatively standard. With the help of Exit Consulting Group® (ECG), you can be prepared and ready to make decisions that maximize your profits. At ECG, we work with our clients to engineer a unique exit strategy that allows you to sell your business while maximizing value.
If you are looking to sell your business within the next one to two years, now is the time to start your preparation. While several factors can affect the value of your business, the most important considerations are your broker, why you are selling your business and the timing of the sale.
The Process for Selling Your Business
Selling your business in a market that is constantly changing has its pros and its cons. If you feel you have hit a plateau in your exit strategy and need some help furthering the process, Exit Consulting Group is here to help. We work with business owners and guide them through the business selling process. We consult our clients in regard to:
- Defining business owners’ wins: their goals, long-term plans, and possible exit strategies
- Recording business assets and liabilities
- Determining a realistic value range for the business
- Enhancing business value
- Targeting buyers
- Qualifying potential buyers
- Negotiating the best deal
- Documenting sale and transaction records
- Managing the business transition as ownership is transferred
Jeff Lysaught, CFP®
Managing Director, The Hunter Group
As a CFP working with small business owners for over 25 years, I can tell you that you will most likely sell your business only one time. You had better get it right! Exit Consulting Group has the experience, knowledge, and depth to make things happen—the right way!
Willoughby & Associates, CPA, CVA
The hardest part was considering that we won’t be here forever. We have to think about the success and the future not only for the company but also for the employees.
Exit Consulting Group took care of all of it. The integrity and trust I felt from day one goes a long way. Anyone who is in business and has been in business for a long time will have that sense.
Preparing Your Business for Sale
1. Get an estimate of your business’ value.
While you may have a general idea of your business’ value, the best thing you can do is get a third-party valuation to receive an accurate estimate of what your business is worth. Valuation firms can help set a realistic baseline of your business’ worth. While reviewing, these experts look at revenue, inventories, and any other tangible assets, like real estate, the company has. They will also factor in any outstanding debts or loans to give you the most accurate information possible.
As a basic rule of thumb, small businesses are typically valued at two to five times their annual owner’s cash flow. This valuation is determined by financial health, customer base, management team, specific industry, and trends in the market; location can also be a significant factor as well.
2. Gather accurate and up-to-date business financials.
A sale is more likely to close when the seller is transparent about their business finances. When selling a business, it is essential to have accurate financial records of the business for at least the last five years, and up-to-date financial statements.
Working with an accountant is a great way to confirm you have accurate financial information to share with potential buyers.
3. Prepare your exit strategy.
There are many scenarios where a small business may need to be sold, such as the business owner’s death, extreme financial changes, burnout, business owner’s retirement, or lack of interest by the next generation in taking over the family business. We recommend preparing your exit strategy, even if you have no interest in selling currently. The modern market changes very quickly, and preparation is critical for you to get the best value for your business. At a bare minimum, every exit strategy should contain:
- Succession plan– A succession plan names the individual or team that will take over your company’s day-to-day to operations. One frequently used strategy is to appoint a trusted employee who knows the ins and outs of the business and keeps things moving, allowing the buyer to learn the industry and the business.
- Contingency plan- You will need to have a good understanding of pitfalls or pain points that a new buyer might face. The business transition should happen smoothly by having a contingency plan in place to act on these pain points.
- Budget, Account and Taxes- You will need to know how much you will make from the sale to cover your living expenses.
Every business will have a unique exit strategy and Exit Consulting Group customizes your plan to help you create your most strategic, profitable, and fulfilling path forward.
4. Keep your sales up.
When preparing to sell your business, it’s essential to keep running the business as usual and continue to make improvements such as launching a new and improved website or updating the storefront. Buyers are typically looking for a business where they see profitability, success, and a good customer base. If you can choose when to sell, make sure you are selling at a time when the company’s sales are growing. Selling at a time of declining sales may cause buyers to underestimate the value of your business.
5. Hire a business broker.
Selling your business is hard and you don’t have to do it alone. Business brokers will perform a business valuation, prepare a prospectus, and help you find the right buyers for your business. The best way to improve the ability to sell the business is for the owner to focus on running the business while having a broker focus on the transaction.
Exit Consulting Group offers a unique brokering experience that identifies the best option for your business. We not only provide a business valuation, we also take an in depth look at your business as a whole, and identify opportunities for growth.
6. Pre-qualify potential buyers.
If you find a prospective buyer who is serious about purchasing your business, you should have the interested party enter into a confidential agreement with you prior to providing them any information about your business. Once signed, they then go into the next phase called “due diligence”. Due Diligence allows the buyer to see more information about your business such as company organization charts and other general information which will allow them to make a purchase offer for your business. Once the right buyer is found, you should confirm that they are qualified for the loans they need before proceeding with the closing process.
Exit Consulting Group provides a network of prescreened buyers ready to pull the trigger on the right opportunity. Our goal is to help you sell and transition your business with confidence.
Typical Questions from Sellers
What information will a buyer require so I can sell my business?
While each sale is unique, a seller can typically plan on providing at least the following documentation:
- Profit & loss statements (present and past years)
- Current balance sheet
- Cash flow statement
- Business tax returns (most recent and past years)
- Copy of the existing lease
- Insurance policies
- Non-disclosure and/or confidentiality agreements
- Executive summary of the business
- Detailed business profile
- Professional certifications and licenses
- Supplier and distributor contracts
- Employment agreements
- Organizational Chart
- Employee Roster
- Sales History
How do you reach qualified buyers with complete confidentiality?
There are many ways to reach qualified buyers with confidentiality. The most effective way to keep things confidential is to have an NDA (Non-Disclosure Agreement) put in place. Making sure the information you show potential buyers excludes names and private information is another approach as well. Learning about your buyer is another good idea. Other options include requiring pre-qualification documents from buyers before sensitive details about your business are made available, holding off-site meetings, and more. If confidentiality is a concern of yours, we can help.
What is the Fair Market Value of my business?
A business’ Fair Market Value is the price at which a willing and able buyer and a willing and able seller would transact for the business. The best valuation is determined by taking the business out to market and finding multiple buyers. Buyers will tell you what they think the business is worth and having more buyers interested in your business will give you a higher valuation.
How will seller financing enhance the value of my business?
Seller financing enhances the value of your business by increasing the volume of buyers that are interested in purchasing your business. Buyers are willing to pay more when competition is more prominent.
Let Us Help You Sell Your Business
Exit Consulting Group offers a unique approach to selling your business. We work directly with you to build your personal goals, design the best plan for them, then work with you to put the plan in place. No matter when you plan to sell your business, we will work with you to ensure that you transition with confidence. We would love the opportunity to work with you and are confident that we can help you sell your business. Contact us today.