Start With a Business Valuation
The very first step is to determine what your business is actually worth. The business valuation or business appraisal is done so you can determine what the business is worth and so buyers can see what the “true” cash flow is, if they purchase the business. To do this, please gather all financial documents for the business. This includes the last three years of business tax returns and a year-to-date income statement (P&L) and balance sheet. Later, we will also need a list of assets, including their approximate market value, once we go to market. We go through all of this information, make sure the finances reflect the correct Seller’s Discretionary Earnings (SDE) for smaller businesses or adjusted EBITDA for larger businesses, and determine the full value of your business. Once you know what the business is worth, and we get an idea of the industry and it’s qualitative aspects, we can start to search for a buyer.
Consider Who the Buyer Will Be
Who is going to purchase your business? There are generally three types of buyers; high net-worth individuals, companies, and private equity firms. High net-worth buyers may be looking for a company to own if they want to be their own boss or aren’t ready to retire yet. These buyers want to get out of the corporate rat race and have a desire to own a business instead of being an employee. They might feel like they can run their own business, and control their own destiny, instead of having someone else control their work hours, or the way things are done. Most of these types of buyers are going to have some funds from their savings to use for the purchase but will likely need to get financial help from a bank to purchase the business. They may or may not have experience as a business owner, but will likely have experience in the industry and know what it takes to be successful.
Companies also buy businesses in their industry to spur quicker growth. While this is who the typical business owner believes will buy their business, this is actually rarely the case for smaller businesses. Smaller businesses also rarely understand the mergers and acquisitions market and are sometimes unwilling to pay market prices. Once a business grows into the lower-middle market or middle market, businesses tend to be more understanding of M&A and acquisitive. While we love when another business buys one of our businesses, as this typically cuts down on questions and post-closing training, we have to be prepared that this may not be our buyer.
The third type of buyer is private equity. This may also include venture capital, on occasion. Typical private equity buyers are sophisticated. They have gone to the best schools and learned to buy, run, and sell business. They dive deep into due diligence and do lots of research on an industry. They are generally savvy negotiators. Since PE firms use leverage (bank loans) to juice their equity returns, PE firms need a deal to work under the confines of a bank loan. PE buyers have become a larger part of the marketplace over the past decade.
Since no one can be sure who will ultimately buy your company, we have to prepare the marketing materials to appeal to all three types of buyers. As Washington DC business brokers and from speaking with thousands of buyers over the years, we know their likes and dislikes. You will want to put your best foot forward or risk losing a solid buyer or, potentially, not get the kind of deal you want.
Know What the Buyer Will Want
The main thing buyers want is cash flow. They want to make sure the business is going to be profitable. They also want to make sure there is adequate cash flow post-closing, so they can start working on improving the business right away. Depending on the size of the deal, it may or may not include working capital from the Seller. Generally, the new owner will spend some time learning your specific business, even if they have direct, industry experience. Prior to closing, though, buyers will want to know about the current inventory, the debts, the customers, and anything else that will have an impact on the current cash flow as well as profits now and in the future.
This is why it’s crucial to have as much information as possible ready before going to market. The business for sale must be prepared, or risk losing solid, early buying candidates. Buyers will want to look at everything to make sure the business is viable, to ensure they’ll be able to be successful, and to see why they should consider buying this business instead of a different one. The buyer will review all of the information in the Confidential Information Memorandum (CIM), ask detailed questions surrounding the valuation, as well as ask other qualitative questions about the business and industry, to make sure it’s the right one for them. For this reason, it’s crucial to be prepared to answer questions about the business. We help you answer those questions the right way. These answers are not always as obvious as they may seem.
Make the Business More Attractive
How about the rare business Owner that wants to improve aspects of his business, well before a sale, to make it more attractive to potential buyers? We can help. If you’re not ready to sell your business for the next three to five years, you have time to make the necessary changes. Quick fixes in personnel or financing engineering are not what a buyer wants to see, right before going to the market. Buyers will inspect the “human capital” surrounding the businesses to make sure the business isn’t completely dependent on the Owner. In other words, is the Owner wearing too many “hats”? Buyers want to see a layer of capable management, so that they can spend their time thinking about and deploying strategy, not necessarily changing lightbulbs. If the business is dependent on equipment, they will inspect that equipment to make sure there are not large capital expenditures waiting for them, when they take over the business. In summary, make sure the business is not too dependent on the current business Owner, remove any personal items on the balance sheet that’s not going to be included in the sale, keep the proper amount of inventory in stock, and replace or fix equipment well in advance of a sale. In general, put yourself in the Buyer’s shoes and act accordingly.
Start Looking For A Buyer
Once you have everything ready, it’s time to find a buyer. We can help you find the right buyer for your business. Often, we have multiple buyers for our businesses. This let’s you choose the buyer who is the best fit. That may not necessarily be the highest bidder. It might be the buyer that treats your employees and the legacy that you’ve built, the best. If you’re looking for a buyer who will care for the company, we can find one. If you’re looking to get the best price for the sale of the business, we can help find a buyer who is willing to pay a little more for the right opportunity. Our expert Washington DC business brokers have connections with local, national, and international buyers, so we can find the right person, company, or PE firm to buy your business.
What to Look for When Buying a Business
Along with helping sell businesses, we help buyers as well. If you’re considering moving into a new industry or purchasing a new business, let us help you find the right one. We’ll discuss what you’re looking for and connect you with businesses for sale that meet your needs. Some of the things to consider or look for include how long the company has been in business, how long the current owner has owned it, why they’re selling, and the potential for the business. Each of these is important and allows you to find a business to purchase that meets your needs exactly.
We really enjoy helping other businesses buy a business in their industry (horizontal integration) or buy businesses in their supply chain (vertical integration). This often results in synergies (cost savings) that will make the purchase price more appealing to you and your company. Please let us know if we can help.
Our team of experts lives in Washington DC, so we know the area. We also understand the market for businesses in Maryland, northern Virginia, and Washington DC and how to help you buy or sell a business. We know the buyers well, including a huge list of local buyers, both businesses, PE firms, and high net-worth buyers. If you need to sell a business in Maryland, we are Maryland business brokers, as well. We know what sellers are looking for and what buyers might need, and we can close any sale correctly. We almost always pay for ourselves through some unforeseen aspect of the deal. Though only 20% of businesses on the market end up selling, we sell more than 85% of the ones we work with. We know what to do to sell any profitable business. Contact us today to learn more about selling your business or to talk about a business valuation.
How do we do it?
At CGK, we’ve learned the best practices from years of working at higher levels of finance at private equity, investment banking, hedge funds and we’re bringing that experience to your small or medium-sized business.
We have buyers are from the mid-Atlantic, across the United States, and even international buyers.
What do we do better than other Washington DC business brokers or other Virginia business brokers? We understand what it takes to sell a small to medium-sized business better than others. It is not as simple as merely finding a buyer. As a business owner, you need an advisor that can help you through the process from start to finish.
This includes marketing the business to qualified buyers and leading the process through due diligence, legal, and banking. We also run our process differently from almost everyone at this level. We create buying interest and run a bidding process to ensure that you get the highest price and the best terms.
Having completed numerous complicated deals, we understand what needs to happen to get a deal done. That’s why we sell over 85%+ of our businesses, compared to an industry average of less than 20%. The only ones we don’t sell unexpectedly struggle after we start the sales process. Call the expert Washington DC business brokers today.
We know Washington DC.
We aren’t newcomers to the District, we’ve been here for years. We know the crazy streets, we know the tourist hotspots, and we know where the real business gets done. We’ve grabbed a burger at Good Stuff Eatery, and we’ve watched the Navy Yard be transformed. And best of all, we’ve see the Nationals beat the odds and become World Series champs!
But even more, we know DC businesses. We know this market and what sellers need and what buyers want. We have the ability to close a sale and the expertise to know it’s closed right. Contact your expert Washington DC business brokers today to start a confidential, no obligation conversation.
What They’re Saying
My experience in working with Greg Knox of CGK Business Sales was 5 star. Greg was clear, straight forward and prompt in all of my dealings with him. I received excellent and strategic advise for the sale of my business. This is a ringing endorsement for CGK Business Sales.Jan Goldman
Greg did a excellent job . He explained us every detail about the valuation and sale of our business. We had no idea at the beginning, however, we learned a lot with his guidance. He answered all the questions and concerns. CGK Business Sales is one of the best companies in the DMV. They have great customer service .Tuncer Turker
Had an expert evaluation of my company. Greg was smart and up front with answering all my questions and concerns. Great service.Nicolas Raines
Greg Knox, CFA has spent his 20+ year career in investment banking, private equity, a hedge fund, and institutional trading, at institutions as Deutsche Bank, T. Rowe Price, and Wachovia. After his MBA at Cornell... (click Greg's picture to read more)
Derik Polay has over twenty years of experience in distressed securities and mergers and acquisitions and seven-plus years of upper-management positions at small and middle-market businesses. Derik’s previous ... (click Derik's picture to read more)
Eric Lewis has over 17 years of experience in the financial industry. He has worked for a breadth of companies ranging from investment banks to proprietary trading firms. Following his MBA at the University of Chicago, Eric... (click Eric's picture to read more)
Jason Clendaniel has been in “business” since he was seven years old. Whether mowing lawns, or delivering papers, Jason learned business from the ground up. After graduating from the United States Naval Academy... (click Jason's picture to read more)
Matthew Mistica has 13+ years of experience in finance and entrepreneurship. Matthew spent 7 years in Corporate Finance working for Chevron and Shell Oil. After his MBA at the University of Houston ... (click Matthew's picture to read more)
Wes McDonough has over 18 years of experience in both entrepreneurship and corporate finance. Previous to CGK, Wes held numerous positions, including accounting, payroll, billing, project management, and IT/Application Support at ... (click Wes' picture to read more)
Matthew Zienty has 20+ years of financial industry experience in areas ranging from institutional equity trading, currency trading, financial sales, RIA valuations, payout/loan negotiations & compliance. He has worked for ... (click Matthew's picture to read more)
David Smoot has 20 successful years working for Fortune 500 companies in sales and finance and owning his own small businesses. His leadership roles included sales, finance, managing multi-million dollar product launches, training new ... (click David's picture to read more)
Mr. Thomas “Jay” Lennon is an Air Force veteran, combat aviator, and distinguished leader with 26 years’ experience leading multi-million dollar projects, finance, and organizational transitions, inside and outside of the government.... (click Jay's picture to read more)
Lance Hupfeld has over 25 years of experience in sales and business development management. With a broad array of valuable experience, Lance has deep knowledge in healthcare consulting... (click Lance's picture to read more)