4 Steps for Selling Your Business the Right Way
Before you sell your company, finding the right broker is essential
Selling any business can be a complicated, stressful process. The emotions involved can be draining, and seller's fatigue sets in as you provide information to potential buyers and sit through countless meetings with accountants and attorneys who seem like they’re either defending or critiquing the organization you’ve built. That’s why I highly recommend using a broker who can make the process easier by reducing your workload and stress while getting you a much sale price in the end.
Even though a business broker will charge a percentage fee of the sale, I find you generally make that back in the increased sale price and time and frustration saved.
My go-to resource locally here in Westlake Village, Calif., is Dave Richards of Keystone Business Advisors. They have the professionalism of a big firm with a focus on businesses with $500,000 to $30M in revenue. Dave has acquired and sold many companies in the landscape maintenance field, and since I have many clients in that space, he’s my go-to-resource for businesses in Southern California for that industry.
Dave just sold one of my client’s businesses in the logistics, storage and warehousing space. It was a very successful transaction, but the deal almost fell apart several times, which is not uncommon when you’re selling a business.
You are negotiating the sale of what may be your single biggest asset; one that you have probably nurtured from infancy to where it is at the time of sale. Things can get very emotionally draining. A broker will help you find a good buyer match, leading to a bigger sale price, more favorable terms, and, typically, a quicker closing process.
Here are four steps you need to follow to find the right buyer for your business, and how a broker can facilitate the process.
1. Define the most-likely buyer
Before promoting the sale of your business, you need to figure out who is likely to buy it. Will it be a strategic or a financial buyer?
Strategic buyers are generally larger firms in the same industry that are looking to increase profitability by adding volume or improving their offerings.
Financial buyers are often investors who don't have much interest in the operations of the business other than as a method of increasing their portfolio’s value. You'll find that financial buyers might look to flip the company in a few years, and some may want you to keep an interest in the organization to encourage future growth.
An experienced broker can help identify the types of buyers most likely to be in the market your company, and who you should be looking to sell to.
What is your role within the company? Are you just an owner, or are you involved in day-to-day aspects like project management, accounting, or construction? Is the business financially viable without you in those roles?
Your role is important because it determines if just anyone can buy the business, or if they’ll need to have special skills or qualifications to run it as successfully as you have.
The size of your company also factors into the kind of buyer you should market to because a large organization is a difficult purchase for an individual to make. It's more likely that another business or investor group will be interested, though. It doesn't make any sense to market your company to someone who can't run it unless it's an investor who has no interest in the day-to-day and will bring in someone able to fill your role.
2. Assemble your team
Just like you need the right people around you when running your business, having a broker or some advisors who will serve your interests during the sale process is essential.
Transferring business ownership includes many small steps:
Obtaining an opinion of its value
Confidential business review
Time and responsibility scheduling
Bulk sale escrow
Closing and transfer
It takes a lot of time and effort to sell a business, so having the assistance of a business broker and other advisors can make a huge difference and maximize the value of your company.
I have existing relationships with advisors and brokers who can assist you through the stages of selling your business. That way, you can focus on the end goal rather than details like qualifying interested parties and establishing a time frame.
3. Using a broker to each the right buyer
The method that you use to reach a buyer is dependent on the type of buyer you're looking to attract.
A local business broker, like Sunbelt Network Broker, known more for its ability to sell “Main Street” businesses, i.e., restaurants, dry cleaners, flower shops, etc., can help connect with buyers in your area who are interested in acquiring your type of business. This approach will generally succeed if your business is small enough for a single person or family to afford and run.
An industry-specific business broker might be necessary if you're looking to attract a person or company with industry experience or relevant credentials from outside the geography. These brokers have client lists in numerous geographical areas, helping you to track down the best possible buyer. For instance, from my work in the landscape industry, I have several go-to resources whom I make introductions to that buy and sell landscape businesses across the nation. These experts know the market, know the players and can fairly quickly identify opportunities for you.
For example, if you feel a large firm with offices all over the state or country would be your best bet, this type of financial intermediary can leverage wider connections to bring you the best match and price. Industry-specific brokers can also help you find private equity firms who are looking for businesses like yours to add to their portfolios.
Finally, if you think a competitor might be interested in purchasing your company for strategic reasons, such as taking over your existing contracts and assets, you could approach this other business confidentially to gauge interest. From there, you can attempt to negotiate a price, keeping in mind that your business could cease to exist after the completion of the deal. Again, a financial intermediary skilled in sell-side representation can probably be a great resource in these deals as they buy and sell businesses every day. Whereas you probably will do it only once in a lifetime. Therefore, these agents or brokers can be a great ambassador to speak for you in these situations.
4. What's your business worth?
Of course, before you even begin the selling process, you'll want to figure out how much you can sell your business for. If the likely price isn't high enough, take steps to build your business’s value before putting it on the market.
The Goldhill Group helps businesses from $2M to $20M in revenues through our Value Builder System, which provides you with a valuation estimate and shows you how to build your company's worth before you step away. That way, you can maximize your return. We also have relationships with business brokers who can streamline the entire process. To get your free Value Builder Score and estimate of value visit this page: build your business’s value.
Schedule a quick call with us today to see if we're a good fit for your organization.