If you have decided that selling your Houston-based business is the right exit strategy, you will want to make sure that you understand the steps involved in the process. These include having a good understanding of why you’re selling, the timing of your sale, your business valuation, what financial statements are required, the process of finding a qualified buyer, and how you plan to sell your business.
All potential buyers will be looking for in-depth information about your business, including:
- The reason why you are selling and if it has any impact on the future of the business.
- The financial performance of your business in detail.
- The status of employees in the business and whether those who are in critical positions plan to stay.
- The status and value of the real estate involved in your site.
- Proof of all of the information you are providing.
To meet these requirements and properly understand the value of what you are selling, you will need to have a business valuation conducted for your business.
Conducting a Business Valuation
In short, a business valuation will determine what your business is worth. A proper business valuation will give an accurate estimate of its current value and provide you with ways to increase its value. Your business is essentially worth the following:
- A multiple of earnings compared to like businesses (gross sales or owners benefit times an industry multiple).
- A capitalization of the net profit 20% to 50% or a simple multiple of owner benefit.
- And if your business makes little or no money, asset value is the only value. (Goodwill + Inventory + Equipment +etc.) Either sold as a whole or liquidated over time.
There is no doubt that the process of business valuation is complex, yet critical. Working with Transworld Business Advisors of Houston ensures this step is done properly.
Finding a Qualified Buyer
Finding the right buyer is extremely important; it takes a significant amount of time and expertise to do so to ensure your success in selling your business. This is why many business owners choose to work with a business broker to derive the most value from the sale of their business.
When it comes to locating the right buyer for your business, Transworld Business Advisors of Houston will use the latest technology to present your company to other business brokers and strategic buyers all over the world during the selling process. This greatly multiplies the effort in your favor. With Transworld Business Advisors of Houston, you have literally thousands of industry professionals selling your company, yet your confidentiality is always respected.
Our marketing program includes placing your listing in various industry databases, Internet sites, and publications that are constantly updated. Transworld spends more money in advertising and marketing for buyers than anyone else in our industry. We organize all necessary documentation and release information as needed. We use limited information when advertising to maintain confidentiality. Then, buyers are pre-qualified and required to execute a confidentiality agreement before receiving any sensitive information concerning the sale.
Our process attracts thousands of buyers, creating competition for your business. Buyers are qualified for financial ability to meet the offer. Then, we will reduce that number to only the most qualified buyers. Once you meet the best of the buyers, we urge them to prepare and present all offers.
The financial documentation you will need to complete your business evaluation and show buyers includes historical full-year financial statements for three to five years, plus federal income tax returns for the same years. You will also need to show:
- Latest interim financial statements
- Aged accounts receivables
- Inventory ledger and inventory costing policies
- Fixed asset or property
- Plant and equipment ledger
- Aged accounts payable
- Notes or loans payable
- Contingent or “off-balance sheet or unrecorded” liabilities (such as pending or existing lawsuits)
- Related parties (or parties with conflicts of interest) and details of transactions with such
- Existing contracts or agreements (such as equipment and facility leases)
- Key person information
- Owners and their percentages of ownership interest
- List of patents, copyrights, trademarks and other intellectual properties and intangible assets
Add Value to Your Selling Process
Overall, a business advisor can bring exceptional value to the process of selling your business. Here’s why:
- The selling of a business is a very complex process. There are many steps involved, and leaving even one out can have a significantly negative effect on your finances and your future.
- Most successful business people are not experienced in the selling process and the transaction is too important to be left to chance.
- Most people don’t have the time to properly go through all of the steps involved in the selling process without expert assistance.
- You want to keep your business and financial information confidential. This is impossible if you are representing yourself in the selling process.
- You want to get the best price. A savvy business advisor can make the difference between a successful or unsuccessful transaction.
- You need quality representation. The transaction you are contemplating is too important to entrust to someone inexperienced in the field.