Top Questions Business Owners Ask
About Selling Their Business
Q: How do I figure out how much my business is really worth?
There is no one business valuation method that fits all businesses. The value of your business will be based on several factors including the market value of assets, earning potential, cash flow, and return on investment. Other considerations include the terms and structure of the deal. While value is more than just price – earnings are generally considered before taxes, debt, and expenses.
Q: When is the best time to sell my business?
Determining the best time to sell a business is based on more than just profit potential. Many business owners decide to sell their business when they find other opportunities and commitments to invest their time and resources in. Others need to sell because of health or financial issues. Ideally, the best time to sell your business is when sales and profits are up and financing is available for buyers.
Q: How long will it take to sell my business?
The national average is approximately six months from the decision to sell to the actual closing of the deal. The actual timing can vary based on a number of factors including the deal structure, asking price (versus true value), the local market and even the time of year. One of the main factors that determine how quickly your business will sell is the ability to find a qualified buyer.
Q: What can I do to increase the value of my business?
Valuation of your business can vary greatly depending on who is determining the value. A competitor for example may place a much different value on your business than a prospective buyer. To increase the value of your business in the eyes of a qualified buyer:
- Make sure your accounting records are in order
- Have a steady history of profits
- Show how strong a position your business has in the market
- Have solid management that can help with the transition of ownership
Q: Should I use a business broker or other intermediary?
Selling a business can be a time-consuming and complex process. As a business owner, your main priority will be keeping your business profitable and attractive to prospective buyers. Using an intermediary like a broker allows you to run your business while they manage the sales process. This includes:
- Confidentially marketing your business
- Preparing presentation packages
- Screening prospective buyers
- Negotiating and evaluating offers
- Performing the many tasks necessary during the selling process
Also, an intermediary can bring objectivity and act as a buffer between the Buyer and Seller. For more information read our article: Help I Think I Need a Broker: Using a 3rd Party to Help Sell Your Business.
Q: What do I need to get a preliminary assessment of my business?
You will need the following items to get started:
- Financial statements and tax returns for three years and year to date statements.
- A copy of your business lease or a copy of the most recent real estate appraisal if you own the property.
- Estimate of the fair market value of all business assets, including equipment, inventory, etc.
- A copy of your Dealership or Franchise agreement.
- Sample promotional literature such as brochures, postcards, etc.
- A brief history of the company and a description of current products or services.