There comes a time when a Business owner may decide to sell their Business. This could be for retirement or other reasons. Businesses typically take hard work, time and effort to establish and if successful can be very rewarding for their owners. When the time comes to sell your business, you should enjoy a further reward in a good selling price that may help fund your retirement or allow you to pursue new ventures.
Unlike selling a house or car businesses typically are sold by specialist firms like Tom Murray and Associates and are sold discretely through a private and confidential sales process. This is to protect the business from competitors who may look to capitalise on the sale, not to alert customers and to retain key staff.
At Tom Murray and Associates we sell a variety of businesses and work to ensure that our Clients achieve the highest possible selling price.
The key to achieving the highest possible selling price for your business is preparing and planning the future sale of the business well in advance of the sale.
Most business selling prices are determined by a multiple of what is called EBIDTA – This is earnings before interest depreciation tax and amortisation. Different multipliers are applied to different types of businesses depending on the complexity of the businesses or competition and ease of entry and these usually have a range from for e.g. 3 to 6. Whether 3 or 6 is applied is determined by facilities and other non EBIDTA factors largely down to how well the business is managed. In addition Directors/Owners drawings are added back to the EBIDTA figure.
By planning in advance to sell your business and sometimes this is maybe 2-3 years before you may wish to sell the business you will run your business ensuring that EBIDTA is maximised and that known issues that may affect the sale or saleability of the business are addressed well in advance to ensure a smooth sales process. This will help ensure that you be able to use a high multiplier when your business is being valued. Remember that you as the seller will be asking your sales agent to value your business but any potential buyer will carry out an independent valuation of your business to ensure that the price the business is being sold for reflects its market value.
This process usually uncovers issues within the business which if known and not addressed prior to the sales process commencing can result in delays in the sale completing of the sale falling through.
There are many pitfalls that will determine whether your business can be sold and for the price that will meet your expectations. Selling businesses is not easy so preparation and planning is key. If you are considering selling your business I would recommend you book a pre-sale consultation with me and engage my services to assist you to pre-plan the process and help you identify what actions need to be taken to maximise the sales price and ensure a smooth sales process.