5 important things to know about selling a business
5 important things to know about selling a business
Selling a business can be an overwhelming process. There are dozens of tasks involved and documents to manage. Not to mention, you’re stepping away from the business you spent so much time building and growing.
Here are five important things to know about selling a business. We hope this helps you to prepare for the journey you’re about to embark on.
1. Revenue isn’t always the most important factor for buyers
For most buyers, cash flow and EBITDA (earnings before interest, taxes, depreciation and amortization) are more important than revenue. They’ll also look at things like scalability and customer diversity to understand the growth potential of your business. So, when your appraiser comes to provide a valuation, they’ll look at all of these factors to determine your company’s worth.
2. Profit isn’t always the most important factor for sellers
Money might not be the most important factor to you when you sell your business. You might pass up a bigger paycheck if you know that the buyer will run the business according to terms you’ve laid out. Or, you might pass up a large lump sum in favor of a larger payment broken down into small chunks over time. Keep this in mind as you start to field bids.
3. It can take upwards of a year (or more) to sell your business
Many business owners are surprised by how long it takes to sell a business. But the reality is that it will likely take between six and nine months. For some people, the process is even longer. There are some steps you can take to sell your business faster, such as preparing all your documents ahead of time and lowering your price, but be prepared for it to take at least a year.
4. You get to keep the cash
Most business sales have a “cash-free debt-free” structure, which means that the seller gets to keep the cash but must pay off any of the company’s debts before transferring it over. The exception is with businesses that rely on petty cash for day-to-day operations (such as pawn shops or video arcades) and businesses with split payment structures (in which case any down payments or first-half payments are transferred over).
5. NDAs are crucial
Nondisclosure agreements can protect your identity throughout the deal so that no one knows you’re selling your business. They can also protect any company secrets you don’t want released to the public while you’re still the owners. Your business broker can manage the NDA process.
Lion Business Brokers wants to help you sell your business
We understand all of the difficulties that come with selling your business, and we can help to make the process easier. Contact us today for a free business valuation and to get the process started.
5 important things to know about selling a business
Selling a business can be an overwhelming process. There are dozens of tasks involved and documents to manage. Not to mention, you’re stepping away from the business you spent so much time building and growing.
Here are five important things to know about selling a business. We hope this helps you to prepare for the journey you’re about to embark on.
1. Revenue isn’t always the most important factor for buyers
For most buyers, cash flow and EBITDA (earnings before interest, taxes, depreciation and amortization) are more important than revenue. They’ll also look at things like scalability and customer diversity to understand the growth potential of your business. So, when your appraiser comes to provide a valuation, they’ll look at all of these factors to determine your company’s worth.
2. Profit isn’t always the most important factor for sellers
Money might not be the most important factor to you when you sell your business. You might pass up a bigger paycheck if you know that the buyer will run the business according to terms you’ve laid out. Or, you might pass up a large lump sum in favor of a larger payment broken down into small chunks over time. Keep this in mind as you start to field bids.
3. It can take upwards of a year (or more) to sell your business
Many business owners are surprised by how long it takes to sell a business. But the reality is that it will likely take between six and nine months. For some people, the process is even longer. There are some steps you can take to sell your business faster, such as preparing all your documents ahead of time and lowering your price, but be prepared for it to take at least a year.
4. You get to keep the cash
Most business sales have a “cash-free debt-free” structure, which means that the seller gets to keep the cash but must pay off any of the company’s debts before transferring it over. The exception is with businesses that rely on petty cash for day-to-day operations (such as pawn shops or video arcades) and businesses with split payment structures (in which case any down payments or first-half payments are transferred over).
5. NDAs are crucial
Nondisclosure agreements can protect your identity throughout the deal so that no one knows you’re selling your business. They can also protect any company secrets you don’t want released to the public while you’re still the owners. Your business broker can manage the NDA process.
Lion Business Brokers wants to help you sell your business
We understand all of the difficulties that come with selling your business, and we can help to make the process easier. Contact us today for a free business valuation and to get the process started.
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