Selling a business you’ve poured countless hours into isn’t easy, and trying to do it yourself while still running the operations can be a challenge.
Just determining how much the business is worth can take three to six weeks, and someone at the company will have to gather documentation during that time, says Terri Lastovka, manager at Zinner & Co. in charge of business valuation and litigation support.
Once you know what it’s worth, it’s time to find a buyer. But where do you look?
“It depends on the business and the relationships you have with various people,” says Lastovka. “You can look to friendly competitors, employees, vendors or even customers, depending on what the makeup of your business is. You can also look to family members. If none of those are options, then you’ll probably want to get some help by getting someone with some experience in finding buyers.”
That’s where a business broker comes in. Most are generalists and deal with all types of businesses. Many also have real estate licenses to handle real estate transactions that may be part of the deal.
“It’s a different process than selling a house,” says Lastovka. “There is no multiple listing service, so it’s a matter of brokers either advertising or talking to people they know. Some will do research and send out letters to potential buyers, and all brokers talk to each other.”
Expect to spend six months searching for a buyer, and the process could stretch to two years.
“A business owner could sell the business themselves, but it would be difficult,” says Lastovka. “How much time do they have on their hands? A family member might be able to help, but it’s very time-consuming. They don’t have the contacts or the know-how.”
Another advantage to using a broker is that it makes it easier to keep the potential sale of the company hidden from employees and customers.
“If employees get wind of it, they might get nervous and jump ship,” says Lastovka. “Customers may get nervous and find another source.” How to reach: Zinner & Co., (216) 831-0733
What’s it worth?
The first step in selling a business is determining its value.
“A lot of business owners have a tendency to think their business is worth much more than it really is,” says Terri Lastovka, manager at Zinner & Co. in charge of business valuation. “They’ve poured their heart and soul into it, and it’s more than just a job to them. There is a lot of emotion attached to it, so they often have unrealistic expectations.
“It is really important to talk to a professional who can analyze the financials and the revenue streams, the vendor base and the cash flow. They can take a look at the equipment and the history of capital expenditures so they can put together a package of information.”
Taxes are also a major issue when selling a business.
“It’s always good to know what the tax consequences are before you go into it,” says Lastovka. “You can get really creative with the tax planning if you know what you are getting into. There are different trusts or a number of different tax avenues you can go down if you really look at it closely, because you don’t want to get hit with a big tax bill. Always get a tax adviser when selling a business.”
