Best Time To Sell a Business?
Deciding to sell your business is both an emotional and financial decision. Many of us have put years or decades into the company, and it can almost be like a family.
You may be employing children or other family members, and their impact has to be considered. Experts agree that you should generally start preparing three years in advance and not underestimate the time, energy, and expense of selling your business! The best time to sell your business is when you are doing well and are profitable, and the acquirer can see more growth potential to come.
There are advantages and disadvantages to selling to different types of buyers.
Employees
Your employees know the business and customers and will likely ensure a smooth transition. They may not have as many financial resources as the other types of buyers, but an ESOP can be a great equalizer.
Financial Buyer
The financial buyer typically looks for the lowest price and hopes to sell as a profit in 5-7 years. They are also likely to make the most changes impacting your employees.
Strategic Buyer
The strategic buyer is typically a competitor or a business that has synergies with your company and may pay the most money for your business.
To start the process, make sure your bookkeeping and accounting are accurate and in an easily understandable format. If your financial statements are incorrect, the buyer may lose faith in the information you provide and pull out of the deal or substantially lower the offer price due to uncertainty.
The next step is employing an accountant or bookkeeping firm experienced to re-cast your earnings to show what the financials would look like if you remove generous benefits, higher than average salaries and adjust the statements for Earnings Before Interest, taxes, depreciation, and amortization commonly referred to as EBITDA. This will help you attain a higher value for your business. To gain the most value you will need to carefully plan your exit and enlist a team of trusted advisors.
Matchbooks is a virtual bookkeeping and consulting company. We help companies like yours make more informed decisions, increase cash flow and improve daily operations. For more information, contact us at consulting@matchbooksusa.com