How to Sell Your Business for the Best Price in 8 Steps
The time has come. You’ve been working hard building a sellable business. You’ve sacrificed time, put in the invisible work (the work done when no is watching) and have put so much effort into growing your business into something truly valuable. Now it’s time to sell it and move on for a variety of reasons. The goal as a seller is to obviously maximize the selling price and sell to a buyer who you believe has what it takes to carry on the legacy you’ve built.
With billions in connections, we want to share with you some steps to help you sell your business for the best price:
Determine what your business is worth
A business is generally worth a multiple of EBITDA (earnings before income, taxes, depreciation and amortization). Depending on the size of the deal and the industry, that can be 2-10x EBITDA. Smaller deals generally average 2-3x EBITDA, medium deals 3-5x and large deals 5-10x EBITDA.
Prepare your financials with your accountant
Because a business is valued on its EBITDA, good financials are required as it will prepare the buyer with some sort of validation. Having financials that are up to date, organized and prepared properly is critical. Most buyers want to see 3-5 years of financials in order to apply some sort of normalized projection. Remember, buyers aren’t buying the business for the present moment, they are buying the business for the future opportunities, and the best way to predict the future is to be clear about the past.
Find a business broker
Depending on the size of your deal you may want a business broker to help. Our recommendation, if you’ve never sold a business before, is to leverage BizON and have your acquisition team on hand. This can be a business broker or a team that consists of your accountant, lawyer and banker. If represented properly and prepared, most sellers will garner a higher valuation when sold.
Develop the executive summary of your business
This document is a brief outline of the company’s purpose and goals. While it can be tough to fit on one or two pages, a good summary includes a brief description of products and services, and a summary of a company’s objectives.
Put your business on the market
Market your business to buyers looking to acquire a company. Cough, cough, click here.
Field offers from potential buyers
Receive offers from buyers and negotiate the best one.
Let the buyer perform due diligence
Buyers generally get 60-120 days to verify the financials and validate if they are getting what they are paying for.
Close the deal
Time to celebrate! Sign the final contracts and start the transition period.
FAQ’S ON SELLING A BUSINESS
How much is my business worth? This is one the most popular questions we are asked, so we’ve developed a quick business valuator form, click here.
When is the right time to sell your business? This can be a very personal answer, but we wrote a blog about it here.
How can you sell your business quickly? By being as prepared as possible. In the micro market, we’ve seen an average acquisition timeline of 3-4 months. But the deeper question is - what is the best time of the year to sell your business or franchise? Read more here.
What type of business is the best to sell? – Businesses in all industries can be sold, but not all valuable businesses are sellable. What makes a business sellable? We like to look at businesses that are self-sufficient (not dependent on a leader); align with social, economic and tech trends; and last, a business that has a strong, recurring business model. We tend to see a ton of activity within the retail, restaurant/food services and manufacturing space.
Who is the best broker to sell my business? – Depends on the size of the deal. For small deals (under $5,000,000 in valuation) it’s best to use a service like buyandsellabusiness.com. For larger deals try connecting with a business broker here.
Remember, if you are interested in receiving the latest business news, insights and opportunities from BizON, you can subscribe to our newsletter here or join our text messaging list here. Also, if you are not a BizON user yet, what are you waiting for? Click here!
Opinions expressed here by Contributors are their own.