If you have spent years building a business then you will most likely come to a point where you decide to sell your company to a third party. There are a number of reasons why an entrepreneur makes the decision to part ways with the business that they have dedicated their careers towards creating. For many business people, common reasons for selling a venture include retirement, wanting to move on to another venture, or sickness. As such, you should carefully consider everything that needs to be done when you place your business on the market for sale.Foremost, you are going to want to determine what a buyer is going to be willing to pay you for your venture. For most people, the concept of business valuation is extremely difficult. As such, we strongly recommend that you work closely with a business appraiser that can effectively provide you with an understanding of what your business is worth. When a business valuation expert reviews your company they are going to look at the earnings of the business, the value of the tangible assets on your balance sheet, and what comparable businesses have sold for in the past. Although it is extremely expensive to go through this evaluation, it is an imperative part of the business selling process.After you have determined the free market value of your business, you are going to want to think about how you can market your business for sale. In many instance, it may be in your best interest to hire a business broker that can introduce potential buyers for your company. However, business brokering firms typically charge a fee equal to 10% of the total amount of the sale if they are successful in obtaining a buyer for your business. As such, you may want to review many websites that are on the Internet that will allow you to list your company for sale to the general public.Additionally, prior to listing your business for sale, you should work closely with your CPA and tax attorney to determine the best way to sell your small business. In many instances these professionals will inform you that the best tax strategy will be to sell the assets of the company rather than the stock of the business. However, each business sale transaction is unique. Only a qualified and licensed professional can assist you in making the determination of how the business can be sold to a third party.One of the things that you should also incorporate into your thinking as it pertains to selling your business is that you may be required to stay with the business for six months to one year as the new owner transitions after the transaction. Among small businesses, it is a common clause within a sale contract that the previous business owner is available to introduce customers to the new owner. The new owner will also want you to work closely with existing employees so that they can understand how the business will change once you sell the business to a different entrepreneur.Prior to selling your business, you are going to want to have all of the appropriate documentation in place so that a potential buyer can understand your firm very quickly. These documents include the previous three years of tax returns for your business, your business valuation, and other metrics from which a buyer can render a decision as to whether or not to purchase your company.In closing, it is extremely important for you to understand every facet of how to sell your business to a third party. You are going to be required to have a substantial number of business professionals working with you in order to complete this transition including your CPA, an attorney, and a business valuation expect. However, from the sale of your business, you can expect a substantial return on investment if you have developed a highly profitable venture.
4 Ways a Business Broker Can Obtain a Higher Business Selling Price
Using a business broker has many advantages for the small business owner. The most prevalent advantage is getting a higher price and because of this higher price the business broker can often pay for themselves.Here are 4 ways a business broker can help you get a higher price for you company.1. Proper pricing. Because business owners are not trained valuation professionals, sometimes they will seriously underestimate the true value of their business and a sophisticated buyer will get a “steal of a deal” without the seller even realizing the mistake.Unlike selling real estate, there are many components of a business that you are selling. A business has its F&FE (furniture, fixtures and equipment), inventory, goodwill, non-compete, and also accounts receivable and accounts payable. All of this has to be considered when determining the pricing, not to mention any real estate that might also be included. It is the combination of all these items that composes the final price.A professional trained to do valuations, like a business broker, understands valuing techniques and how your specific industry handles each item for the valuation of the company.Depending on the industry of your business, there are certain rules of thumb when determining a fair market price. For example, in the insurance industry, it is common to use a factor of the commission. In other industries, it is common to use a factor of the profit or revenues to determine the fair market price. Each industry is different.Lastly, to accurately determine the value, you need to review the comparable sold businesses and their selling price. This is information that is not readily available to business owners and it difficult to properly value a business without this critical information.2. Stronger marketing effort. Often when sellers decide to sell themselves they will place their business on one or two business-for-sale websites. A professional broker may use as many 300 sites to promote the business as well as tap into existing buyer lists they already have. This alone can increase the price especially when there are multiple offers on a business.Knowing the ideal buyer profile, a well-trained business broker can also target the ideal buyer and yield a higher price for the business by going after strategic buyers instead of financial buyers.3. 3rd party negotiations. Using a third-party to negotiate the pricing removes the emotional factor and increases the price. One broker tells her customers, “Every time you talk about price with the buyer, you lose $25k.”A business broker uses specific negotiating tactics to get sellers the highest price possible. Since a business broker is often paid a percentage of the selling price, it is in their best interest to get the highest price.4. Time is money. A business’s value is heavily dependent on the profit and revenue. When an owner tries to sell their business themselves, they take their focus off running the business and often profit and revenue drops. This reduces the price of the business. Using a business broker allows the business owner to stay focused on running the business and getting the highest selling price possible.
Marketing is the Secret to Building Your Own Startup Business
How do you make your new business succeed? What is the secret to a successful business?These are the oft-repeated questions that many would-be entrepreneurs and even those who are already into business have been asking.The answer is – marketing. Yes, marketing is the secret to building a startup business. It is the ingredient to make your business a success.Why marketing? Because the market is the heart of any business. Without a market, there is no business. After all, you can have the best product or service in the world, but if no one hears about it, it is not going to matter and you won’t produce even just a single sale.So, how do you market your business, a product or service? Consider these five (5) basic ingredients.1. Develop a brand. A brand is a business’s identity. It establishes a name, credibility, image and reputation that sets your business apart from your competitors. For example, you buy something in a supermarket and you will see that people are willing to pay more for branded products.The first step in developing a brand for your business is to know who you are. What image do you want to convey to your target customers? Are you an upscale grocer or a class C restaurant?2. Design a logo. One way to brand your business is to have a logo. When you design a logo, remember this: it must be simple and can be easily distinguishable from the logo of other firms, especially your competitors. To use a classic example, look at the logo of General Motors or even that of McDonalds. If you see the two letters GM what comes to mind is that of General Motors. In the same manner that people who see two golden arches assume that a McDonalds restaurant is there.3. Choose A Product Or Service. What product or service are you going to sell to your target market, to your customers? The products and services that you offer must answer their needs, wants, and preferences. Otherwise, you can’t generate any sale and in turn, profit.4. Know Your Market. That is the reason why it is important to know your market. Who are your customers and where are they located” What are their needs and wants? Without knowing your market, your business will simply wither and eventually die. A good entrepreneur must not go into business without knowing what and who his markets are.5. Identify Your Competitors. When you are building a new business, a key to survival is knowing your competition. Your competitors are those who offer the same or similar products and services that you are providing. What are your competitors’ strengths and weaknesses? You should know their marketing strategies, advertising and promotion tactics.You must also know what your competitors are doing in the market, how long they have been in business, what worked for them when they were starting out, and who are their customers.ConclusionOrganizing a business is easy. What is hard, as well as challenging, is to make your new business survive, grow and become profitable. But knowing how to market your business, product or service, is the secret to building your startup business. It is also the secret to your business success.