Are You Ready to Sell Your Business?
Imagine yourself sometime in the future. You’ve reached the closing date of the sale of your business, and all that’s left now is to sign the papers and execute the transfer of the assets or stock of your business to the new owner.
Tomorrow, the business you’ve worked so hard to build will no longer be your primary responsibility. While you may still be involved through the transition period with the new owner, it’s essentially a done deal.
How do you feel? What are you thinking?
Selling your business can be one of the most stressful, yet rewarding actions you’ve ever taken, but it is by no means to be taken lightly. You may feel relieved, elated, excited. You may also experience a sense of loss for something into which you’ve poured so much of yourself.
Selling a business can bring you a new sense of freedom and can open new doors, whether you’re retiring or venturing into a new business. It can also create an aura of uncertainty, bring to the surface unspoken desires of family members, and lead you to question your goals.
As a well-known an established CPA in Silicon Valley, I’ve been involved in countless mergers and acquisitions. I’ve known Kris Karlson for well over ten years, and in that time I’ve had the privilege of working with him on deals small and big, some exceeding $100M. I like working with Kris as my California business broker because I can always trust his judgment and advice. I know that my clients are in good hands, and will receive unbiased, honest assistance in selling or buying businesses. Kris has an uncompromising work ethic, a strict adherence to transparency in the process, and a keen insight into what works and what doesn’t. He’s creative, but with an attention to detail that makes for a smooth close. I highly recommend Kris as your M&A Advisor. ~ Russ Filice, CPA
That’s why we won’t leap at you with an engagement agreement and entice you with an inflated business valuation. We’d prefer to wait… and then move fast when you’re ready.
If you’re considering selling your business, then first explore your “readiness” to sell on these three fronts:
The readiness of the business…
When we work with Sellers, we’ll review your profit history, sales trends, and the industry outlook. We’ll delve into your financials, talk about the condition of your premises and company, and then give you our estimation of what the market will consider the value of your business.
The goal of this assessment is to determine the saleability of your business at a market comparable price, and to create a prioritized list of actions you can take to build more value into your business. What you don’t want is to pay $30,000 to $50,000 for a “Business Valuation” report that becomes an expensive door stop. We prefer to let the market determine the price, and to create a sales process that culminates with a bidding war that drives up the price.
You also want to be realistic. Expecting a price and terms that the market deems unreasonable will only lead to frustration and unnecessary risks for you and your business. Sometimes all it takes is updating your accounting system, reducing the perks that you’ve been getting, and separating out or selling personal assets that are not business-related.
Your personal readiness…
I’ve worked with a number of business owners in their 70′s who decided they’d rather stay than sell. We have put in Contingency Plans (link to plan) for them. I’ve also worked with people in their 70′s to help them buy businesses. Age doesn’t have to be a factor in selling your business.
Ask yourself these questions, and then talk with your family, partners, associates, and even your professional colleagues:
What do I want to do next? (If it’s in the same industry, be careful about non-compete clauses in the agreement)
Am I ready to give up control of the business?
Will I get enough money to justify all my hard work?
Will I really be improving my financial or personal situation?
Do I want to maintain a relationship with the business, perhaps as a part-time employee or consultant?
Can you see yourself retiring? How about using the funds you receive from the sale of your business to buy or start a new business? Think about what you love about your business, and your day-to-day involvement in the business. Having mixed emotions is common. You may simultaneously feel a sense of relief and a sense of dread.
In our experience, business sales conclude more successfully, and with both parties happy about the deal, when the Seller is ready to transfer control of the business to a new owner.
The timing of the sale…
When’s the best time to sell your business?
Consider the two areas above – the readiness of your business and your personal readiness. If you need the time to build value into your business, then if at all possible, do it. And, if you’re not ready to sell, then don’t.
We know that sometimes life circumstances can dictate the need to sell your business. Divorce, health issues, or other unfortunate events can precipitate the need to sell. You might not be ready to sell, but circumstances dictate otherwise.
That said, it’s still important for you to make your business as attractive as possible to buyers. Obviously, you don’t want to sell your business when market demand is down. If you can wait until you’re ready, your business is ready, and the market is good, then we encourage you to do so.
If you can’t wait to sell, then at a minimum we encourage you to get a realistic assessment of the saleability of your business, and then work with your CPA to clean up your accounting systems and financial records to make your business more attractive to buyers. The assessment shouldn’t cost you more than a few thousand dollars, and offers a realistic view of the market value of your business.
This is a good time to define your goals and priorities. You want to establish the optimum time to sell, and to sit down with your CPA and attorney to understand the legal, financial, and tax implications of selling.
As your M&A Advisors and California Business Brokers, we’re here to help you establish the best or right time to sell, and only then work with you to make the sale happen.