Selling a business is a challenging process, from valuation to closing. An honest assessment of your business coupled with a realistic understanding of what you can expect from the sale process can make the journey easier. The following 12 questions can help you devise a workable sales plan, clarify your goals, and ultimately, get a higher value for your business:
- What do I need to do before approaching a buyer? Preparation means more money and a shorter timeline to closing. Focus on paying off debt, streamlining your operations, organizing financial information, and identifying any potential weaknesses.
- How long will it take to sell my business? On average, you can expect the process will take 6-18 months. If there are serious issues or few buyers available, it could take longer.
- Can I offer seller financing? Offering seller financing widens the net of potential buyers. Seller-financed businesses tend to sell for 10-15% more than other businesses.
- What is my business really worth? You’ve put a lot of hard work into your business, but ultimately, value is in the eye of the beholder. A quality valuation from a skilled M&A advisor or broker can help you estimate the total sale price.
- What documents do I need to show buyers? Buyers don’t want to take your word for things. They want to see clear supporting evidence of every claim you make. At minimum, you’ll need a YTD balance sheet, YTD income statement, YTD cash flow statement, tax returns for the last 3 years, and a summary book of your business. Have these documents ready to go.
- What documents will I need for the due diligence process? A skilled M&A advisor can help you determine the items you’ll need.
- Should I hire a broker or sell the business myself? There’s almost no argument in favor of not hiring an M&A advisor or business broker. They offer real value, can shorten the timeline to closing, and prevent the deal from taking over your life.
- Who can help me sell my business? If you opt not to hire a broker, you’ll need a financial analyst or a CPA and a lawyer, at minimum. Don’t plan to go it alone.
- How do I qualify a buyer? For most businesses, a buyer will need to sign an NDA, submit to a credit report, and provide a financial summary. It’s also helpful to ask them to set deadlines, since their ability to stick to these deadlines will affect the total time it takes to get to closing.
- What contracts or agreements should the buyer sign? The deal will usually include an NDA, letter of intent, purchase agreement, assignments of leases and licenses, and documents transferring all tangible and intangible assets.
- How long does it take to close once I find a buyer? The answer varies, and is heavily dependent on how much effort each party is willing to put into the deal. Generally, you can expect it to take 30-60 days for each stage, and a total of 120-200 days.
- What happens when the business sells? In many cases, you’ll need to stay on for a period to oversee the transition. Make sure these obligations are clearly spelled out in all agreements, as well as in verbal discussions.
About Five Talents Financial Group
There comes a time when business owners should decide how they will handle the exit of their business. Prudent entrepreneurs do not leave this critical juncture to chance, they plan for it thoroughly and well before such an event should occur. Successfully navigating the sale or transfer of your business requires a dedicated and capable team. The members of Five Talents collectively possess nearly a century of business experience combined with specific industry training and certification. The skills and know how, combined with a deep commitment to the best possible outcomes for our clientele, enable us to provide you with advisory services you can feel secure with.
Give us a call to have a confidential discussion about what may be right for you and your family.