When meeting with prospective clients looking to sell their businesses, there are a handful of questions we are frequently asked. Because we hear them so often, I thought addressing them here with our readers would be useful! Please keep in mind though the following question and answers may not be all inclusive, they will provide an adequate starting point for those considering the sale of their business.
Question: How do I value my business and is it even worth selling?
Answer This is the question we hear most frequently from business owners. The short and obvious answer is a business is worth what a buyer is willing to pay for said business and there is a buyer for every business (if it's priced right). Valuing a business takes into account a complex interplay of factors. There are the simple factors affecting the value, such as the financials, but there are also a number of other factors that go into valuing a business. Which is why this is something best left to the professionals, who are familiar with the current market, comparable business sales and can settle on a value that is worthy of the business and makes the business saleable. Sadly, we often see sellers let go of their business for less than they are comfortable and a lot less than they could have, the reason being that they simply didn't know where or how to get proper help selling their business. Business brokers have the knowledge and skill set to value a business and value it to sell.
Question: Can I just sell my business myself?
Answer The knee-jerk answer to this question is, of course, you can! But let me ask you some questions. Do you have access to a large network of company resources and buyers? Do you know how to properly market a business and keep the sale confidential? Are you aware of the legal and financial implications of selling your business? Do you even have time to sell the business on top of running it successfully? More than likely you said no to all of these questions. Taking the knee-jerk answer further, there are three simple reasons not to sell your own business. First, it is fact that business owners who sell their business on their own will receive far less return on their business investment than if they had worked with a broker. Second, there are a number of legalities that affect selling a business. It is not uncommon to see business owners sell their own business only to meet their buyer in court later. It can be risky to sell your own business without the experience to properly deal with all of the legal ramifications involved. Third, it is also a fact that it takes much longer for a business owner to sell their own business than it does to have a professional sell it for them. Business brokers, among other things, have access to a vast pool of qualified buyers and having access to these qualified buyers substantially reduces the time to sale.
Question: If I seek assistance in selling my business, how much will it cost?
Answer Business brokers earn their commission (i.e. their paycheck) upon the actual sale of a business. As a result, business brokers don't typically get paid until you do, unless there have been previously agreed upon retainers. The commission is a percentage of the final purchase price of the business. This benefits the seller in two major ways. Because the business broker does not get paid until the business sells, they must work diligently on your behalf in order to receive their paycheck. The second reason is because business brokers are paid a percentage of the sale price, they must also work hard to help you receive the most value for your business.
To learn more about the business sale process and to discuss additional questions you may have, please visit our website at www.tworlddenver.com or schedule a free consultation with one of our brokers.
Cameron Pourhassanian a Business Broker with Transworld, brings years of experience in the technology industry and sales management to the table. His experience stems from managing technology solutions for national companies and large corporations as well as small to medium sized businesses. Having had experience in varying industries spanning from nursing homes and medical facilities to manufacturing and retail, Cameron understands the challenges that business owners face and loves seeing them grow and succeed. He now enjoys helping current and prospective business owners navigate the often difficult process of buying, selling, and growing businesses via acquisition.