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How To Sell My Business For Maximum Value

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You have been building your business that you've put a lot of time, effort, and sweat equity into growing, and now you're looking to sell. Your objective is to get maximum value and you're assessing steps to prepare for the sale. There are a multitude of variables to consider and in this post, we'll cover them all maximize the price you receive when selling your business. If want to go one step further and you are thinking of selling your business we recommend using Business Exits who specialize in selling companies.

What is Your Business Worth?

What a business is worth is relative to your individual business, the market and what potential buyers are willing to pay. However, there are some common questions to consider, including:

Part of the valuation process is looking at historical sales of businesses and comparing your business to those. The accepted valuation methodology by buyers is the multiple of earnings method. That calculates what the net profit of a company was for the last 12 months and then multiples that by a number between 1-4. Smaller companies sell in the 1-2 X multiple range, Medium in the 2-3X multiple range and large in the 3-4X multiple range. For example you have a transport company in Dallas Texas, It makes $500,000 profit per year for the owner. That would sell in the 2-3X multiple range so between $1million and $1.5million dollars.

What Makes a Business Worth More?

The amount a buyer is willing to pay for your business will all come down to one thing, return-on-investment (ROI) and relative risk. The lower the risk, the higher the price and vice-versa. With that being said, what really makes your business worth more is mitigating the risk of the business failing in the future by having the following characteristics associated with your business:

When is the Best Time to Sell Your Business?

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There is never the 'perfect time' to sell your business. Sometimes you are forced to sell because of external circumstances; sometimes you get presented an offer that is too good to be true. However for the scope of this article the best time to sell your business is when there has been sustainable growth. Growth is tracked in yearly increments. Let's take the following example:

In the above example, the best time to sell would have been late in year three. You don't want to make the mistake of selling your business once you've lost interest, and the business is starting to decline. This can significantly impact the offers you receive.

Why Do Owners Sell Their Business?

Commons reasons we find owners selling their business:

What Is The Selling Process?

The selling process of how to sell a business is fairly straightforward but can be more complex and take more time depending on the size of the business. In general, most sales will be structured like this:

  1. You decide to sell
  2. You get a valuation of your business
  3. You develop a prospectus (all the facts and figures about your business)
  4. Find potential buyers for your business (whether you use a broker or sell it yourself)
  5. Negotiate a price with potential buyers (total price and also terms of the deal)
  6. Transfer the assets & money
  7. Help train the new buyer to run your business

How Long Will it Take to Sell Your Business?

The time it takes to sell a business depends on individual business and terms of the deal. Generally though, larger deals (over $1 million) will take longer to sell than smaller deals (under $200k) because of the complexity of the business and also the risk that a buyer is taking. Industry reports say the average time to sell a business is 10 months.

Where Can You Sell Your Business?

1. Business Exits

Most businesses are best sold through brokers who help with finding buyers, negotiating and structuring the deal. Business Exits is our recommendation. They do deals all across the USA.

2. BizBuysell.com

Smaller business and micro-businesses are usually best sold privately by the owner through forums or classified websites. These are businesses that are 1-person companies or making less than $100,000 per year in profit.

3. Houlihan Lokey

Larger businesses are best sold through investment banks or merger and acquisition companies. That is companies doing over $50 million per year in revenue.

Who Will Buy Your Business?

They are a lot of potential buyers on the market for businesses. Through experience, many of them fall into one of the following personas:

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice.