How to Get the Best Price for Your Business

01 Feb How to Get the Best Price for Your Business

Nearly three quarters of small business owners plan to leave their businesses in the next ten years. For some, that means passing the business along to a family member or a carefully selected successor. For others, that means selling the business.

But selling a business isn’t easy. And if you’ve spent your life as a business owner, your skills are more targeted toward running the business, rather than selling the business.
To get the best price for your business, keep these tips in mind:

Do not try to sell your business yourself. Assemble an advisory team, including an accountant, a transactions lawyer and your closest personal advisors. Make sure your advisors have done this before and demand honesty from them. Do not surround yourself with people who will tell you what you want to hear.

Define why you are selling your business. Develop a clear and simple statement to explain why you are selling the business and what you want to achieve from the transaction. Reduce your statement to a sentence or two and hang on to it. You will need this touchstone as you work through the rest of the process.

Understand what you are selling and its value. Look at your company’s financial performance compared to industry standards. Make sure you have a thorough understanding of the difference between your business and your competitors. The largest impediment to selling a business is usually the seller’s outsized expectation.

Consider the reasons your business would be attractive to someone else. Make sure your view of your business is realistic. Consider the competitive environment, barriers to entry, threats from new products or services and the bargaining power of suppliers and customers. The buyer’s excitement is directly related to how much he or she is willing to pay for it.

Get your house in order. Obtain and review a typical buyer’s due diligence request list. This will prepare you for the due diligence process and help you consider your business from a buyer’s perspective. Polish up the things they will value and deal with any potential problems.

Sell a business opportunity. Generate excitement and buzz around your company. Be positive, realistic and honest. Focus on the positives of your business overall, not just a pile of assets or financial statements. If possible, find ways that to add to the value of your business and try to implement them.

Plan for multiple interested parties. Prepare a marketing strategy for the sale of the business, which will bring multiple buyers to the table. The stronger the business, the better the strategy, the more enthusiastic they will be.

Do not start with a price. Let the process give you the best idea of what your business is worth. Prepare a brief confidential outline of what kind of deal you are looking for, without setting an asking price. The more prepared you are, the more likely that you will be able to know a good deal when you see it and move quickly if the right buyer comes along.

To learn more about transitioning your business, contact us.

Joel Rose

With over 35 years of experience, Joel Rose helps families – and their businesses – to prepare for the future. He offers guidance and support to help his clients create estate plans and succession plans that meet the needs of the whole family. Through his extensive professional and personal experience, Joel is known for his compassion and his ability to find a creative solution to meet each family’s needs.