If you want to sell your business, or at least think about it, you will have many important things to consider. Whats my price? How do I market for future prospects? Do I need professional help? Without possibly covering all the things a seller has to consider, this article discusses some of the basic issues that any seller of a small company in Florida or elsewhere should consider before taking it to the market. Below are some important questions that you as a seller should ask yourself.
Who is the legal owner of my company? Its almost a stupid question, but lets not overlook it. Your company has almost certain assets. When we say assets, we talk about equipment, warehouses, trade fittings, customer client base, accounts receivable, all things you use to run your business. Most small businesses are single companies, S companies or LLC. If you work as a sole proprietorship, you own the assets in your individual capacity. If you run your business as an S-company or LLC, the company is the owner of the assets and so the company itself, not yourself, would constitute the seller of the business.
How will my business be sold? The sale can be carried out in one of two ways. The assets can be sold and transferred from the selling party to the acquiring party, that is, the buyer. Simply put, it is called an asset sale. Alternatively, the buyer can buy shares or ownership interests of existing activities from the seller. In the second case, the company ie, the company or LLC will own the assets to continue to exist, but will have a new owner. Simply put, it is called a share sale. Most small businesses are bought as asset sales, not as a stock market sale. In other words, the buyer or new owner will buy the existing assets in the sellers business and then run it under another and separate entity.
What should be my price? In order to answer this question, you should first try to figure out the value of your business. A method that is usually used to value small businesses is the discretionary profit method. This method requires that the sellers profit and loss statement be evaluated by finding items or expenses that are not necessary for the company and then revising the statement to determine the actual cash flow or profit for the business. The restructuring process means that you adjust or repay the sellers expenses that are not decisive for the business or that the buyer as a new owner is unlikely to incur. When this conversion process is completed, the value is then determined by multiplying the sellers net profit with a multiplier. This is not an exact science, but the method helps at least the seller to get an idea of the price range for his business.
As an illustration, if, after reworking the sellers income statement, it determines that the sellers discretionary cash flow or profit is 100,000, the next step is to multiply that number by a multiplier. Each industry is likely to have its own multiplier, but a regular reference multiplier is approximately 2.0. So, if you multiplied 2.0 times the sellers reconstructed net profit, you get 200,000. Thus, the gross value of the hypothetical business would be 200,000. You should note. the discretionary profit method is by no means the only way to determine the value of a small business. There are other methods. If you think you need professional support to evaluate your business, you should seek the help of an accountant or business broker.
How do I promote the sale of my company? You will of course need to market for potential buyers. Marketing can be achieved through a variety of ways and media. You can start with people who work in your type of business. For example, a competitor may be interested in buying. You can also try traditional print advertising in your local newspaper. If you are in a recognized industry, there may also be trade or industry journals where you can advertise the sales of your business. Another option is to get professional help from a business broker. Typically, the business broker would list it for sale on the internet and through other sales outlets just like a real estate agent would list a home for sale. A business broker usually charges a 10 percent commission for his or her services. If you are interested in seeking help from a business broker, you should find out about their services, what type of company they have sold, what is their commission percentage, and how to go about the marketing process. You should also ask if the broker is a member of a business broker in Florida. While no reputable business brokers can guarantee results, he or she can be an invaluable resource.