Tips from the Pros on How to Maximize Your Sale Price
What are the do’s and don’ts of selling a business?
So you received a call from a potential buyer for your finishing business. Now what do you do?
Investment bankers say there are some definite dos and don’ts when it comes to selling your business.
“You normally have an owner who is getting older and looking for liquidity, or they are receiving quite a few calls from interested buyers, and they are thinking that the market is a little bit frothy from a valuation perspective and they may get a price for their business that they have never seen before,” says Ryan Murphy, vice president of Los Angeles-based investment banking firm Salem Partners. His tips to maximize a sale include:
- Crafting a story about the business; it has to be unique about the capabilities and attributes of the company, what the customer base looks like, and how the growth of the company will occur over the next several years.
- Putting together an information memorandum that describes the story above, including customers and growth.
- Preparing a detailed financial forecast that backs up the growth assumption.
So when is the best time to market your finishing shop for sale? Bohn and Murphy said it is when your business is performing at its best.
“It’s the best, but it is also the hardest time,” Murphy says. “From the investor perspective, they want to buy the business when the revenue stream looks strong, margins look great, and the next 12 to 24 months will have significant growth. This is the point when buyers are willing to pay the most for the business, not when growth has slowed or challenges have emerged.”
As far as time frames, Murphy offers this advice:
- You may be ready to sell now, or in one to three years, but start the process of looking at your business and bringing in expert help to maximize the sale value as soon as possible.
- When companies are ready to sell, it usually takes three to four months for the deal to be finalized.
- Most importantly, this sale is likely the most important transaction of the owner’s life. Make sure there is an advisor ensuring that price and terms are being maximized.
Originally published in the December 2015 issue.