Is my business ready to sell?
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the number one value driver of your business. The more sustainable the future of your companies EBITDA is, the more ready it is to sell. When you think about the word sustainable, that would mean how sustainable the business is with a new owner.
Am I ready to sell my business?
The best time to sell your business is when your profitability, sustainable growth, and management team are all performing at a high level. However, retirement and burnout are the top two reasons people decide to sell their business. If any of these situations describe you, it may be time to consider selling, family succession, or transitioning out of the ownership role.
What is the value of my business?
The first step in the selling process is obtaining an Estimate of Value (EOV) from a qualified Mergers & Acquisitions Advisor , who can recast your financial statements, advise you on the market for selling, make recommendations on how to increase value and provide education regarding the process of selling your business. Additionally, you will learn if you like working with your potential advisor who may be helping you plan and execute the sale of your business.
What is Required Networking Capital and what do I need to know about it?
If you think of your business as a car, Required Net Working Capital is the gas that is expected to be in the tank when you sell. When closing the sale of your business, the purchase price will be adjusted up or down for Required Net Working Capital.
What can I do to increase the value of my business?
While businesses are unique, good business practices are fairly universal. If you are considering a three to five year approach to increasing your business’ value, it is best to work with an exit planning specialist. If a one year program is more aligned with your desired timeline, the Kelly Value Enhancement Program (VEP) may increase your potential sale price by over 20%.
How is the market for selling?
The market for high-performing businesses with EBITDA greater than $500,000 has been excellent. As of January 2020, banks were being relatively aggressive. Companies were making strategic acquisitions and Private Equity Groups had $3 trillion of committed capital. Mergers & acquisitions activity is partially on pause in the wake of the COVID-19 crisis. There are very good incentives from the SBA right now for businesses and individuals to make acquisitions. Private Equity Groups will likely continue buying companies starting in the fall of 2020. For more details regarding the mergers & acquisitions market, click to download IBBA MarketPulse Survey and/or Private Equity Info (PEI) MarketPulse Survey.
What type of buyers would be interested in your business?
There are many buyer types that may be interested in your business. Your business’ industry, sales channels, products, services, level of EBITDA, size, management team, and location determine what type of buyers would be interested in buying your business. When going to market, it is best to go after several buyer types to find a buyer that may be a good fit with an attractive value.
What are realistic expectations to have when selling my business?
Is my business worth what I think it is? Will there be enough money to exit? How much risk will I have after the sale is complete? How long will it take to sell? What type of a buyer will I accept? Will the buyer treat my company as I have? The answers to these questions are different for every owner. To help you answer these questions, Kelly Business Advisors offers a complimentary meeting followed by an Estimate of Value (EOV).
How does one select a Mergers & Acquisitions (M&A) Advisor?
Choosing an M&A advisor should depend on the answers to these key questions.
- Does the advisor/firm have the right experience and competence for selling your business?
- Does the advisor have the ability to scale his/her thinking to meet your needs?
- Does the advisor have time to commit to effectively marketing and selling your business?
- Is the advisor congruent with your morals and values and fun to work with?
- Is the firms fee structure at the right scale for your business?
- Does the advisor and their firm have good references?
Ask these questions and decide who is the best fit to help you sell your business.
What is a Transaction Team?
Your transaction team consists of your M&A advisor and transaction specialists in business law, accounting, financial planning, and subject matter experts. Kelly can recommend appropriate specialists when you’re selling your business. Kelly does not accept referral fees from subject matter experts, lenders, attorneys, or accountants.
What is a buyer actually buying when I sell?
Buyers are seeking opportunities to purchase cash flow, in other words, EDITDA. Your products and services are the buyer’s means of growing EBITDA over time. They are buying your company’s assets in the form of intellectual property, brand(s), management team, products, processes, customers, supply chain, inventory, equipment, goodwill, and other tangible and intangible elements of your business. And, in most cases, your buyer will want all of your employees to continue working for the new owner.
What is the process for selling?
The selling process begins with understanding your business’ value, net proceeds, and the market. Prepare to market your business for sale while maintaining confidentiality. Present your business to potential buyers in a manner that will receive the highest value. Finesse and negotiate an Indication of Interest and/or Letter of Intent. Work though Due Diligence and plan for post-closing transition.
What is the process for buying?
Many excellent businesses are sold without ever being advertised. Kelly offers a complimentary meeting to brainstorm ideas and help you understand the attributes to look for in a potential acquisition. From initial advising to closing, Kelly is the M&A advisor who will help you every step of the way.
Top tips when selling a business?
- “Keep your foot on the gas!” Continue to increase EBITDA until you have been paid for your business.
- Delegate as much of your work as possible to your management team.
- Create a plan for your buyer outlining how you would grow the business in the years to come.