Whether you have built up your business over decades, or your business has developed quickly, selling a business can be a tricky process. It may have taken you five years or twenty years, but either way, starting and growing a business to maturity is an all consuming proposition.
Many times, the sale of a business can set up your retirement if you can realize enough value from the transaction. But how do you begin?
Put Together A Team!
Chances are, if you are running a small business, you wear many hats – manager, bookkeeper, janitor, CEO, cheerleader, salesperson, etc. However, to properly position your business for sale, you have to build a team of professionals who have been through the process before. Your attorney and your accountant should be involved in the early stages of your decision making process.
Not all attorneys and accountants are created equal, however, and you should seek out professionals who have experience in buying and selling businesses. For example, the same attorney who handles all your litigation work may not be the right choice to guide you through the sale. You would be better served to have a specialist handle the transaction.
Valuation – How Do You Set Your Selling Price?
At a minimum, you should identify and retain an accountant who has experience (preferably a certification) in business valuation. Business valuation is its own animal, and you should look for an accountant who has an ABV designation (ABV stands for Accredited in Business Valuation). After all, you won’t know where to set your price without a valuation of the business.
This is much in the same way that you have your home appraised before you put it on the market. If you know where your price point is, then you are setting yourself up for success – in this case, attracting the right buyer.
When Is the “Right” Time to Sell?
The answer is easy – the right time to sell your business is when you don’t have to sell it. The business world is tough. The economy is tough. Things can happen: the company gets sued, a major competitor emerges with little warning, a major supplier goes out of business. All of these things can put pressure on the financial health of your business. Those pressures can force you to sell before you’re ready, and at a lower price than you really wanted.
Another consideration is the health of the owner. If you are the sole owner of your business, and have a health scare or some significant issue, that also can force you to sell before you’re ready and at a steep discount. Obviously, a change in your circumstances like that can not only take a physical and emotional toll on you, but can erode the value of your business if you are suddenly in the market to sell to the first buyer that comes along.
So in short, the time to sell is when you don’t have to sell – when you’re healthy, when the business is healthy and at peak earning capacity. That will enable you to set the highest sale price possible.
If you are interested in selling your business, or are considering buying a business, and want to talk it over, please contact me.