You have worked hard to build your business. You know it’s time to retire and sell your business. Selling your company can be confusing and daunting when there are so many opinions on how to value your business and what your business is worth. Start the process today and avoid these common business selling mistakes.
Start the preparation process early and you could avoid most of these business selling pitfalls!
1. BOOKS & RECORDS: The single biggest mistake business owners make is failing to maintain good records, use software like quickbooks, and use legitimate tax mitigation strategies to a) manage tax liability while b) allowing the business to be financeable by buyers using SBA Loans.
Everybody does it is not an excuse and the more successful you become with running your business the more the urgency is to keep your records clean and legitimate.
If you want the very highest price for your business at a minimum you need:
1. 3 years of Tax Returns – 2017, 2018, 2019
2. 2 Full Years of Profit and Loss Statements – 2018, 2019
3. A “Year to Date” P&L for the current year – 2020 YTD
4. 3 years of Bank Statements
5. Buyers CPA Access to QuickBooks
2. PROPER PRICING OF YOUR BUSINESS TO THE MARKET:
In Florida, there is a true marketplace where businesses are sold and the results of those sales are recorded and tracked by trained professionals. In many states, buyers and sellers turn to their accountants and CPAs who although trained in accounting do not have access to this data nor are in the marketplace.
There are several ways of valuing businesses and you need to pair your business up to the right method and to the value, the market places on the business. In addition valuation ebbs and flows with the changes in the economy: 10 yrs trends, technology shifts, labor rates, immigration policy, political crises, election years, supply and demand are just some of the factors that impact a business’s value in the marketplace.
Buyers use several methods for valuing a business:
Value of all the assets – Asset Sale
Value-based the amount of Revenues times a multiple
Owner Benefits (Profits of the business + Personal expenses paid for by the business) times a multiple (Priced below $5,000,000)
EBITDA times a Multiple (Priced $5,000,000+)
Price to Earnings ratio (for Public Companies)
As you can see when selling your business getting the valuation of the business is critical. With over 300 businesses sold in my career leveraging the data available from Transworlds 10,000 plus sold deals and my decades of experience is a critical element to your success. Our valuations are free and we encourage them to be done yearly.
3. WASTING TIME: If 2020 has taught us anything it is that the world can turn on a dime. As Orlando’s Business Broker I can tell you hundreds of horror stories where buyers wasted time and the financing availability shifted due to global markets (2008 to 2011). Sellers overplayed their hands and lost critical contracts or a pandemic hit (true story) or deal fatigue set in where the parties got tired of the back and forth or waited for another deal that never came. The benefit of working and trusting your Orlando Business Broker is experience. That experience is what helps you know when to pull the trigger and when to sit back. As like a seasoned soldier we have been to battle, know what will and will not work based on the lay of the land. For buyers, we can anticipate problems like this, and for sellers tell you what buyer can get a deal done or not.
For example, everyone thinks they can get a loan and every banker at the local banking center thinks they can lend on a deal but will it happen and what do you as a seller risk when your buyer is not qualified or able to follow the right process to get a deal done. Avoid wasting time in the process, negotiations doomed to fail, and buyers not able to close.
4. PICKING THE WRONG TEAM: The barrier to entry for business brokers is low. All you need is a real estate license. Scary right. Day in and Day out I meet brokers representing buyers and sellers ill-equipped for the fight they are in. They lack resources, knowledge, experience and do their clients a disservice. But the clients hire them over price and or fail to do their own research. Like the swordsman in Indian Jones….it doesn’t end well for them or for their clients.
Do yourself a favor as a business buyer or seller. Ask your broker these questions before hiring them and do your research.
As Orlando’s #1 Business Broker Michael Shea has sold more businesses than any broker. Transworld is the worlds largest business brokerage with over 280 offices worldwide, a state of the art CRM program that proactively matches buyers and sellers, and a total marketing plan that leverage old school personal street work with the latest digital marketing including video, podcasts, and seo dominance. For a personal assessment of your business and its value contact Michael Shea P.A. at 321 287 0349 or visit www.yourfloridabusinessbroker.com