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Factors Determining Your Business Sale Profit

By March 1, 2019 June 19th, 2019 No Comments
Your Business Sale Profit

 

Selling a business is a complex endeavor that usually requires the assistance of bankers, accountants, attorneys, and mergers and acquisition advisors. Whether the owner profits depends on the sale’s timing, the strength and structure of the business, and the reason for the sale. Reviewing these considerations can help a business seller develop a solid plan and negotiate successfully.

The Reasoning Behind the Sale

Potential buyers ask many questions, but one of the first is why the owner has decided to sell. Owners sell companies for one or more of the following reasons:

  • Retirement
  • Illness or death
  • Partnership / family disputes
  • Boredom
  • Burnout
  • Career change

Some owners sell when the business isn’t turning a profit, but, if this is your situation, know that this will shrink the pool of potential buyers. A CGK advisor can help you determine the company’s readiness, its marketability, and timing.

The Sale’s Timing

Business owners should get ready for the sale at least a year or so before it happens. The preparation phase helps the seller improve the company’s structure, customer base, and financial records in order to increase its profitability. Such improvements can make the buyer’s transition easier and keep things running smoothly before, during, and after the sale.

Valuation

Next, the owner should determine the company’s worth by asking an appraiser for a valuation. The appraiser will create a detailed explanation of the business’ value, which lends credibility to the seller’s asking price. CGK specializes in business valuations, a critical step in the due diligence process.

Using a Business Broker

While it’s possible to sell a business without help, hiring a business broker like CGK is the easiest way to go. The broker can free up more of your time, which can be spent on keeping the company running (and in strong financial health). We will keep sales confidential and help you get a higher price.

Assembling Documents

Sellers should gather their tax returns and financial statements for the past three to four years and review them with an accountant’s help. Additionally, the owner should list equipment, supplies, and contacts to be sold with the company. Finally, sellers should make copies of these papers for distribution to qualified, interested buyers. Again, CGK can help you through this process from start to finish.

Finding the Right Buyer

Business sales can take up to two years, and finding the right buyer may be challenging. Your CGK advisor will advertise to the right buyer pool, and will keep the process moving by:

  • Getting two or three prospective buyers in case the first deal falls through
  • Staying in contact with those buyers
  • Communicating back to you

We can also prequalify a potential buyer before disclosing information about the business. While there’s some negotiating room, sellers and brokers should stand firm on a reasonable price that takes the company’s future worth and valuation into consideration.

The Bottom Line

Business sales are time-consuming, emotional ventures. A competitive market or a good reason for the sale can lessen the burden, as can the help offered by our CGK business broker team. Call or email us today to set up a free consultation, or visit our website for more information.