There is no question that one of the toughest businesses decisions a business owner will have to make is this: “How do I sell my business?”
Over the next 20 years, the largest transfer of generational wealth is going to happen in America, as the Baby Boomers age into their final years. Along with that generational change will be the eventual sale, closing, or transfer of business ownership unlike anything ever seen in modern history. Simply put, there are a lot of aging business owners in the United States that are going to have to figure out a succession plan in the coming years. What is your succession plan?
If you are like many business owners in the Dallas area, you do not have a willing and ready heir to inherit your business. Perhaps you have a strong management team, or an “heir apparent” inside the company who has worked there for many years and would be a natural person to pass ownership to. However, it is not always financially feasible for an employee to buy out the current owner. Many owners we work with at Sell My Business Dallas either fail to consider what their succession plan will be until they are very late in the game, or they expect that their employees would be a natural answer to their ownership transition but fail to realize that the employees do not have the financial wherewithal to write a big check to buy the business.
Who Will Buy My Business?
If the buyer of your business is unlikely to be your key number 2 employee, or your child who has grown up inside the business and wants to take it over from you, then who will buy your Dallas business? This is one of the fundamental challenges facing small business owners and it is also a prime reason why a business owner would hire and choose to work with a business broker. We are a business brokerage that has been helping Dallas business owners for over 15 years. The role of a business broker is to engage with a business owner to learn about their business, the greater industry, to review the financial performance of the business and to help recast its financials to put it in appropriate position to sell, and to market the opportunity to buy the business and to find a willing and able buyer.
For this service, Dallas business brokers or mergers and acquisitions advisors charge a fee in the form of a commission on the eventual sale price. This means there are no up front fees to engage our firm as your advisor in the process of selling your business. Some business owners are reticent to share a percentage of their sale price with a broker, but they fail to realize how difficult it can be to successfully sell a business. And how much more value can be produced in a transaction by working with a professional who has access to financial buyers, and an advisor who knows how to negotiate and structure M&A transactions. In short, a business broker will increase your chances of successfully selling your business while also increasing the likely purchase price you are able to earn on the open market. Let’s just say, we recommend our services wholeheartedly.
What is the process of selling my business?
Selling a business is different than running the day-to-day operations inside of a company, dealing with management, sales, and the like. Selling a business is a different beast altogether. That is why there is an entire industry built up around mergers and acquisitions, and why business brokers exist across Dallas, but as well as in every other major metropolitan area of Texas and the U.S.
The process of actually selling your business begins when you, the owner, decide it is time to start exploring a sale. In rare cases, a business owner will get a call and an offer from a potential buyer out of the blue, and this will prompt them to poke their head up and look around at their options of selling. For the most part, the idea to sell comes from the selling owner. That is, you. Once you have decided that now is the time to explore selling the business, you will want to engage with a professional business broker to start your advisory team for the process. You can hire our group at Sell My Business Dallas, and like we said, there is no up front charge.
Once you have your business broker or advisor lined up, the process really begins. It is smart to inform your accountant and your attorney about the potential of a sale, also. The accountant will be needed to help us compile and review your financial statements, and he or she may also need to participate in a quality of earnings process that is conducted by the buyer later on in due diligence. Your attorney will be invaluable in reviewing contracts involved with the sale, and hopefully he or she has some experience dealing with business sale transactions and the drafting or reviewing of purchase agreements. We also recommend you look at hiring a tax attorney or a similarly-qualified financial advisor to help you develop a plan for the large influx of money you are likely to receive in a sale. Estate planning, tax planning, life insurance – these are all issues that should be reviewed ahead of time with the proper advisor.
In house at our business brokerage, we will start the process by asking you a litany of questions from our internal checklists, as well as reviewing your financial statements from the last 3-5 years. The more you have available to review, the better. Hopefully your business has been operating at a profit, and a consistent profit at that. It is much easier to sell a business that is profitable than one that is not, on average. But we will help you compile your financial records and work with you and your accountant to recast those statements to show normalized earnings. It is key to arrive at an adjusted earnings figure that illustrates the true ‘owner benefit’ enjoyed by the person who owns the business. That is to say, many business owners run additional expenses through the company that affect net income. These expenses are discretionary and should be “added back” to arrive at an adjusted EBITDA figure before going to market.
Next we will help prepare an investment memorandum, sometimes called a CIM or CBR, that will be the “marketing package” that we take out to the market to give potential buyers a teaser of information about your company. This document will likely be up to 20 pages in length and contain a description of the history of your business, the service or products you sell, a list of key employees and customers, as well as your reason for wanting to sell the business.
The investment memo will also include the re-casted financial statements we prepared with you early on in our process. All together, this process from engaging a firm like ours to putting the business out in front of potential buyers will take 30-60 days. Once we begin to market to our buyers lists and on for sale websites, we will field the inbound inquiries from buyers and vet them before having them talk to you directly. This setup will allow you to continue to operate the business without having to dedicate as much time to conversing with every single person who inquires. It is our job to know which buyers are legitimate, and to answer initial questions to make sure there is a fit between the interested party and yourself. As you can imagine, the process of fielding buyers and having these conversations can take some months.
How can I sell my business fast?
A certain percentage of business owners we talk to are interested in selling their business quickly. The reasons are many. It could be because of a divorce, death, other health reason, or financial stress. After over 15 years of helping business owners sell, we can say that the fastest way to sell a business is to price it cheaply. Much like you would sell a house, or a piece of furniture, you attract buyers by offering a great deal. Now, that probably does not sound like the most perceptive advice to come from a M&A professional. Short of offering up your business for sale at a price that buyers can’t refuse, perhaps your next best option is to hire a business broker like Sell My Business Dallas and to offer the assets of your business for sale based on their replacement value. Or you could sell your customer list. Or your accounts receivable. Breaking the business’ assets up into smaller chunks may make it more realistic to sell quickly if your timeline is truly crunched.
Contact the Dallas Business Sale Experts
There is much more to explain and review about the process of selling your business. Let’s speak on the phone or setup a time to meet in person. Reach us in the office 325 North St. Paul Street #3100, Dallas, TX 75201 or you may call our firm at (469) 513-4000. Thank you for reading our website and we look forward to speaking with you about selling your business.