The Selling Process For Businesses Explained

1.) Valuation 

Two biggest questions to answer, when you begin to consider selling are… “What do I do?” and “Why would I consider selling”; There is no or wrong answer, just your own truth. These questions are important throughout the sales process. The “what do I do?” is most crucial to when the business is being valued. The Business Broker will go through each part of your business to make sure everything is considered when it’s being valued. Including reputation. Reputation within your industry and you market. How well are you known? Next after the business is broken down from a qualitative standpoint. It should be broken down from a quantitative one as well.

How do the sales in the business and the reputation of the business line up?  This is a crucial factor. You could have a large, locally loved brand that runs an $1,000,000 business that only achieves $100,000 in profits. This business is valued less than another $1,000,000 business that achieves 25% margins or $250,000 because of the multiplier. Multipliers vary from industry to industry, and the way you use them is applying them to the profit on the business.  For instance with a 2x multiplier the business with 100k profits is valued at $200k and the $250k business is valued at 500k. This is all assuming that there is good documentation and good transparency with the seller.

2.) Understanding the state of the market

The next step that must be considered is the state of the market. Trends and opportunities in the market have impact on the value of your business. Businesses products and services that are in high demand trade at a higher multiplier and sales value.  It’s important to realize every business is different, and the mix of risks and opportunities for each one is also different.

3.) Consider Real Estate Options

When selling your business it is important to consider all of the real estate issues. Are you cosigning your lease or conveying ownership of your real estate. The real estate issues have impact on the value you can sell your business for and how it will be added to the value of the sale.

4.) Doubling Down on Uniqueness

Every business has its own uniqueness, offering, and clientele. Do you happen to serve a large group of customers regularly? Do you have partnerships with brands that could add value to the business? Who do you have contracts with? All these unique add-ons impact selling your business, and it’s the job of your broker to realize the opportunities in your uniqueness. It is important to note everything is for sale not just your building, not just the business. We don’t leave anything out when calculating the value of your business.

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