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How to Sell a Business – What Matters

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How to Sell a Business – What Matters

How to Sell a Business What Matters

 

Selling a business  can be a difficult process.  Knowing How to Sell a Business and what matters greatly increase your chances of a successful Sale and transition.  Someone may walk in your office one day and offer you 100% cash  at an elevated valuation but that is not very likely at all.  I had owned a business in a very fast growing industry and I was presented with a couple very strong cash offers at fairly lofty valuations but these offers where based on the growth curve of the industry and market conditions overall.  I wasn’t ready to sell my business at that time and several years later when I was ready to sell,  the process of selling  the business and  finding the right buyer and transition for my business  presented a much different challenge.

Ive been involved with the business acquisition  process for over 25 years as a Business Buyer of Multiple businesses, a business Seller, and as a Business Broker assisting others.  I find the following to be important when both Selling a Business and Buying a Business.

  • The quality of the business is important- “We are the highest rated Window Washing business in Jacksonville”
  • The quality of the industry is important – Are you in a growth industry? or a Mature  industry ?    “A rising tide raises all ships”
  • The quality or the overall marketplace we all conduct our business in is important. During our recently experienced recession obtaining money to finance an acquisition was difficult and overall number of business sales were down significantly.
  • The timing of when your business may be best ready to sell and when you as a business owner are ready to sell may not coincide.

 

As you can see some aspects that affect the likelihood of successfully selling your business may reside out of your immediate control.  But knowing more about the process, How to Sell a Business and What Matters, and the current market can only aid in your decision making process.

A Recent survey of fellow business broker professionals involving 100’s of business broker professionals denote  consolidate information regarding Buying a Business in South Carolina, Florida and the entire US as well as Selling a Business in South Carolina, Florida and the US.     Topics in this survey included information regarding who is likely to buy your business,  why will they buy your business and what will they pay for your business.  All businesses have differences yet many businesses share similarities:

Why Will You Sell Your Business?

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Who will Buy your Business?

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Why will they Buy your Business?

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What will they Pay For Your Business?

whats my business worth

 

 

 

 

 

 

 

 

 

 

Business Sold for Multiples

 

 

 

 

 

The amount that Buyers are paying for Businesses ( as a multiple of earnings or cash flow  has remained fairly constant over the last few years.)

SDE- Sellers Discretionary Earnings

EBITDA – Earnings Before Taxes Interest Depreciation and Amortization

So, Timing, knowing who you may best market your business to, what sort of value expectations  you can expect all affect the likelihood of a successful business sale and transition.  There is a lot to knowing How to Sell a Business but getting ready to sell your business and knowing  when you are ready are  are a couple of the very important 1st steps.

Above data  provided by survey of over 300 business brokers throughout the USA coordinated thru International Business Brokers Assn and M&A Source and Graziadio School of Business.

Looking to Sell a Business in South Carolina Florida or SE USA or looking to Buy a Business in South Carolina Florida or SE USA please contact me Scott M Messinger  at Scott@GatewayBusinessAdvisors.com or directly at   for more info see www. SellaBusinessAdvisors.com

How to Prepare a Business For Sale

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How to prepare Business For Sale

 

How to Prepare a Business For Sale – 5 Steps

I  am a business broker based in South Carolina.  I work with business buyer and business sellers in both South Carolina and  Florida. I also owned my own business of 20 years and sold it.  A business owner interested in selling a business needs to know how to prepare a business for sale.

FACT-  Many businesses that try to sell  do not actually sell.

Looking at the reasons that a business does not sell can be guidance towards measures a current business owner can make to prepare a business for sale. Selling a business has a lot of moving parts.  How can one  increase the likelihood of a successful sale?   The answer can be in preparing  for your business sale.

What are some of the top reasons businesses Don’t Sell?

  • Price
  • Business Performance
  • Business has poor records
  • Business completely dependent on Business Owner
  • other liabilities encumbrances

 

The value of a business is ultimately defined by what a willing capable buyer (s)  is willing to pay for that business.

What could possibly be the best approach to preparing to sell your business is to look at your business as a Business Buyer rather than a Business Seller.   Would you buy your business?  If so how much would you pay for your business?

What steps can a business owner do today to prepare  a business for sale?

How to Prepare a Business For Sale

  1. Have realistic expectations. Stories circulate about “Google buying this business for 10-20x cash flow”.

Sales like this are not the norm.  Businesses with Sales of $5M + sell for a higher multiple of cash flow than businesses with $800k of Sales- Generally.  Try to research what other similar businesses my be selling for or have sold for.  A qualified Business Broker may assist with this step.

  1. Ensure your financials are concise and clean.  Are there any outdated entries on any of your financials. Can you readily reconcile any differences between tax records and Income Statements?    Furthermore a business that is doing better is more likely to sell than a business with declining sales or margins.
  2. Have documented business operational procedures or business practices and procedures. If you already have them, review and update them. Consider if it is time to archive or throw out records from 5- 10-15 years back.
  3. Make big and small steps to have less reliance on you as a business owner. Ask the question- “Does your business rely on you ? Delegate if possible.  Sometimes it’s hard to let go of the idea that “only I can do that”.   I’ve personally experienced a long stretch of illness while owning a business and quickly learned of the many activities that I was doing that could be done by other members of my staff.
  4. Clean up your business. Your office, your trucks, grounds, facilities, equipment, tools and employees appearance can all add value.  Equipment involved with the sale that is well maintained and in order provides to the “Peace of Mind” a business buyer is seeking.  Again envision yourself as  business buyer  and looking at your trucks and most of the tires are bald, and smoke is coming out of the exhaust and they look like hell.  It may only take a few thousand dollars to improve this conditions, but a prospective buyer may mentally devaluate business value by tens of thousands or more.  It may create more doubt and uncertainty about other components of business.

 

Again- not every business that tries to sell actually find a buyer that is a fit.   There are steps you as a business owner can make to increase the likelihood of a successful business sale and transition.

Preparing your business for sale is a very important step in the process of selling your business.  Working with a trusted advisor,  finding prospective business buyer candidates is highly important as well.  Finding the “right” buyer candidate  to transition your business to is the end goal that begins with preparing your business for sale.

For More information on Selling a Business or Buying a  Business contact   Scott Messinger- Business Acquisition and Sales-   Gateway Business Advisors      www. SellaBusinessAdvisors.com

 

 

Current Market for Selling a Business

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Selling a Business

 

 

What is Current Market for  Selling a Business  (or Buying a Business). I’ve been involved with business sales for approximately 25 years.  Fifteen years as a business buyer and Seller during which I acquired 9 businesses and 9 years as a business broker representing business buyers and sellers.

As a business broker working with business Sellers and Buyers in South Carolina and Florida we are afforded access to a lot of market information as it relates to business transactions, what businesses are selling for, and trends.  Sales Data and terms  on these private transactions are not readily available to the general public.

 As a business owner or potential business buyer it is not unusual to “hear about someone that sold his business of $X “.  But often that information is incomplete or erroneous.

Below is some market information showing charts and trends relating to business sales throughout the US.  I believe it can provide some insights to both potential business sellers in South Carolina or Florida as well as Business Buyers.  Also below I’ve highlighted my insights to what I believe some of this information means and what may be worth noting.

A review of over 7000 businesses sold during 2015 show:

 

  • The median asking price grew 12.5 percent from $200,000 in 2014 to $225,000.
  • The median sale price also increased a solid 7.6 percent year-over-year, from $185,000 to $199,000.

 

What is my business worth?

 

 

 

 

 

What Does this graph say about Businesses Sold?

A significant determinant of a business sales price is “Multiple of Cash Flow” or “Multiple of SDE (Sellers Discretionary Earnings).  But this “Multiple” does vary based on business size ( Sales and Cash Flow).  Businesses Sold with Sales of $1M-$5M will generally sell at a different multiple than business sold with Sales of $100k-$1M .  Above graph shows as the cash flow of a business increases the multiple of cash flow also increases .  This graph shows a business with approx. $150k of cash flow sold for 2.5 x that cash flow (CF). Whereas a business with  $1M in cash flow sells for 3.1 times that cash flow (CF).

 

What is Value of my Business

 

 

 

 

 

 

What does above graph say about Business Value  and or Business Selling Price. ?

 

Above Graph depicts that The price of businesses sold ( as a multiple of cash flow ) has remained fairly steady over the last 4 years.  Going forward, I expect this to remain consistent thru 2016.

types of businesses for sale

 

 

 

 

 

 

 

 

 

What type of businesses are being sold?  Above chart shows the types of businesses sold throughout the US in 4th quarter of 2015.

Are you looking to buy a business in South Carolina or Florida?   Are you looking to sell your business.  A business is not bought or sold in a vacuum.  How does your business measure to other like or similar businesses?   No two  businesses are the same, but similarities do exist.  Understanding value or potential value may be one of the more important steps that goes into the process of buying or selling a business.

Thinking about buying or selling a business?  Please feel free to contact me Scott Messinger Business Broker to discuss any questions you may have on the process.  And it is a process.  Also, feel free to search on businesses for sale on my site  at:

www. SellaBusinesssAdvisors.com.  or contact me at Scott@GatewayBusinessAdvisors.com

or call direct at (864) 210-8226 or (239) 770-2421.

 

7 Steps to Buying a Business

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7 Steps to Buying a Business

buying a Florida business

Steps to Buying a Business 

Buying a business requires planning and an organized approach.  Many Business Buyers that are Buying a business in South Carolina or Florida businesses do come from out of state.  I am a Business Broker focused in both South Carolina and Florida.  Prior to being a business broker I started and owned my own business and purchased 8 businesses to to supplement our organic growth.  The last 2 business I sold about a month ago had both business buyers from “up north”. The steps to buying a business  can vary depending upon each individuals situation and goals.  Below are some steps that may apply to many business buyers.

1. Have you had “the talk” with your significant other?-  Have you discussed your thoughts, ideas with your significant other?  Does buying a Florida business mean a relocate?  If so how does that affect those most important around you?  I started and owned and sold my own business and to think about making any of these decisions without my wife is unthinkable. I work with a lot of potential business sellers, and when I ask if they have discussed with their wife of 10-20-30 years and they say no, I know  that the decision still has further steps to take.

2. Consider your capabilities.  What are your realistic financial means to buy a business.  Do you need a business that offers Seller financing or do you plan to seek financing from a bank or other?  What is both your true skill set and what sort of businesses do you have an interest in.  And, do you have the financial capabilities to buy such a business, and or or their technical or license requirements that could me met by you.

3.   Geography- both South Carolina and Florida are big states!  Are you looking to buy a business in a certain part of the state or ok for most any part of the state(s)?

4.  Start Looking around.  It’s easy from anywhere in the world to jump on the internet and search for a South Carolina or Florida Businesses For Sale.   This is a very easy part of the process.  But how do you advance your search from casual looking around to trying to reach a goal of for example wanting to buy a business within 6 months.  For every hundred of people that “look to buy  a business”  only a few actually do.  Looking  thru websites is generally a free and fairly benign exercise.  Engaging with someone that understands the South Carolina or Florida market advances your efforts from “looking around” to trying to fulfill a goal.  Contact a business broker and have a dialogue and seek out assistance from someone that engages in this process on a regular basis, and understands the marketplace.

5.  The vetting process.  Getting information from the internet on businesses for sale can provide certain minimal information.  To receive detailed info confidentiality agreements will be signed.  Expect information exchange to be a “2-way street”, you will desire information on a business sellers business including financials, company background and  history.  A business Seller will require information on you, including your financial capabilities and  your background.

6.  Meeting with the Business Seller.  A Business buyer can “meet” a business owner via a phone conference call, but a face to face visit with the owner will allow both the prospective business buyer and Business Seller, to either develop a comfort level to move forward or move on. A successful meeting could result in a contingent offer being generated/presented.

 

7. Generating a business offer to Purchase-  After finding the business that meets your requirements, an offer is generated and presented to the business Seller.  At times an LOI (Letter of Intent) may also be utilized.  The business Seller has the option to accept, reject or make a counter offer.

If accepted, due diligence is pursued with the goal of satisfying the wants of the business buyer and reaching a business closing date whereas the prospective business buyer achieves the goal of being a business buyer. The steps to buying a business can vary greatly.  Having an organized approach and realistic expectations can go a long way towards finding and buying the right business. 

Selling Your Business How to Find a Buyer

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Selling your Business How to Find a  Buyer

Selling your business

You have decided you want to sell your business.  How do you find a buyer for your business?

When a business has been in existence for many years, 10-20-30-40+ years it is not uncommon for the business owner to be approached about selling his/hers business. Or it is not uncommon to “hear about someone interested in buying the business” or have someone express “interest in buying the business”.  Selling your business can be a challenge.   I have seen and experienced this as a business owner and as a business broker. So one may think  “if these  people are interested in buying the business and I’m not even trying to sell it, I think it may be very doable to find a buyer when I am ready to sell my business.” But like a lot of other complex processes, “the devil is in the detail.”  Often  , when ready to sell your  business,  it turns out the person  or competitor, or strategic buyer prospect that was interested in the business 1,2, 3 years ago, is no longer interested- their situation has changed.  Or the guy that said he knew someone  that was interested in the business, doesn’t have the resources to consummate a deal. So how does a business owner find a buyer for the business. 1. Try to find a buyer on his/her own. 2. Hire a Business Broker to find a buyer.   Neither options are guaranteed. What is generally not known by one trying to sell a business is that MANY  businesses that actively try to sell their business DO NOT SELL.  Industry statistics show that well over 1/2 of all businesses that actively try to sell actually do NOT  transition the business to a new buyer. But it is with little doubt that hiring a qualified business broker greatly increases ones odds of finding a buyer.  It is my opinion that a significant reason why utilizing a business broker is the simple fact that most business owners already have their hands full running their business.  And then to add  the components of selling a business to their day is barely doable at best. Marketing the business, vetting out buyer prospects, tire kickers, not disclosing the confidential component of the sale are just a few responsibilities that are easy to do  while continuing to run their business.   Often there is not enough hours in the day to get all that done and run the business. A business broker is able to have “generic dialogue” with competitors and strategic buyers without disclosing the name of the business.  If  Mike from Mikes Towing approaches ABC towing about buying their business, then ABC business knows Mikes Towing is for Sale. If Scott from XYZ  Business Brokerage approaches ABC Towing about a Towing business in the Jacksonville Florida area- confidentiality is maintained. But as a Business Broker we market  looking for business buyers across many different platforms, often searching locally, regionally, nationally and internationally.    So often business buyers are from “Somewhere else”.   Also a business buyer is someone that buys a business.  About 9 out of 10 people that approach about an interest in buying a business don’t buy a business.  They may one day, but that may not be this year or next year.  They are prospective business buyers.- As a business Seller you are looking for a Business Buyer. I personally have bought  several business over the last 25 years. I have made the decision to buy a business- found a business that met my goals and then concern myself greatly if I cannot effectively acquire the business   Many “Business Buyers” looking for a business do not ever make an offer on a business , or buy a business.  They may be a perpetual business buyer prospect, or they may truly be ready to take the next step and be a business buyer. Knowing the difference between a prospective business buyer and actual business buyer can be the difference between an effective sale or a frustrating  time demanding process .   Selling your business can be a challenge. For More information on Selling a Business or Buying a Business  Scott M Messinger (239) 770-2421