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SO YOU’RE THINKING ABOUT SELLING YOUR BUSINESS

SO YOU’RE THINKING ABOUT SELLING YOUR BUSINESS. PREPARATION IS KEY SBDC Webinar – December 19, 2013 Mike Schoville, President, The Business Brokers, Inc. TOPICS. Maximum price Cash flow Valuation Tax returns Built to sell Steps for a saleable business Sales Process Timing.

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SO YOU’RE THINKING ABOUT SELLING YOUR BUSINESS

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  1. SO YOU’RE THINKING ABOUT SELLING YOUR BUSINESS PREPARATION IS KEY SBDC Webinar – December 19, 2013 Mike Schoville, President, The Business Brokers, Inc.

  2. TOPICS • Maximum price • Cash flow • Valuation • Tax returns • Built to sell • Steps for a saleable business • Sales Process • Timing • Planning: why is it important • When to start planning • Who can help • Succession options • Most appealing • Least appealing • Likely buyers • Financial options

  3. PLANNING: WHY IS IT IMPORTANT • To maximize the business value • To control the outcome • To attract quality buyers • To continue the business’ longevity

  4. WHEN TO START PLANNING • Ideal: When starting business • Minimum: 3 years before selling business • Financials, tax returns • People • Market • Products • Information • Competition • Capital expenditures

  5. WHO CAN HELP & THE cost • Accountant • Lawyer • Business Coach • Banker • Small Business Development Center • Board of Directors • Mentor • Twenty Group • Broker

  6. SUCCESSION OPTIONS • Liquidate • Hand off to family, friends or employees • Sellto a third party

  7. MOST APPEALING-BEST PRICE • Buyers understand • Retirement • Burnout • Health issues • Internal disputes • Changing career/lifestyle • Spouse request • Divorce • Upward trends • Good bookkeeping • All revenues included • Few add backs (EBITDA) • Business documentation • Key employees • Business runs without you there

  8. LESS APPEALING-LOWER PRICEMAYBE UNSALEABLE • Buyers don’t like • Declining revenues • Downward trends • Lost market share • Obsolescent product or service • Lots of add backs • Cash not recorded • High customer concentration • Need for large capital expenditures • New dominant competitor(s) • Low barrier to entry • No business documentation • Employee turnover • Only owner decision making • Owner integral part of business • Location

  9. LIKELY BUYERSPositives and Negatives • Relatives • Employees • Newbie • Competitors • Market expert • Equity group • Synergistic acquirer

  10. FINANCING OPTIONS • Cash • Bank financing • Seller financing • Combination • Earn Out

  11. Cash flow • What is it • How is it calculated • Why is it important • Used to determine price • The higher the cash flow, the higher the multiple

  12. VALUATION • Cash flow versus asset value • Three important ingredients • Can the buyer repay debt • Is there a debt service cushion • Is there adequate remaining cash flow for the buyer

  13. TAX RETURNS • Why they are important • Diametrically opposed goals • Minimum 3 years before selling

  14. HOW TO TELL IF YOUR BUSINESS IS BUILT TO SELL • Go on vacation • Then go on a 3 month sabbatical • Acid Test – how did it perform? • Build up to – 3 months away – not negatively impacted

  15. STEPS FOR SELLABLE CO. • Employees trainable & trained • Valuable to your customers, not commoditized • Repeatable, so customers repurchase

  16. Sales Process Market & Promote Prepare Offering Documents . List Business No Cost – No Obligation Evaluation (Pricing) Tour Confirm interest, answer questions Present Offering Buyers ConfidentiallyQualified Offer / Acceptance Financing Due Diligence Document & Agreements Well Deserved Vacation After Sale Training Clo$ing

  17. TIMING • Simple Economics of Supply & Demand suggests for sellers: Sell when few are selling • Expect to see more aging baby boomers sell their business in the next few years compared to the last few years • Profitability trending upward • Banks back in the market looking for transactions • Buyers need to have the financial strength and the relative experience

  18. QUESTIONS Mike Schoville The Business Brokers, Inc. 3050 SE Enterprise Drive, Suite B Grimes, IA 50111 Office: 515-986-6056 Cell: 515-306-8487 mschoville@tbbinc.com www.tbbinc.com

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