Last Updated: August 11th 2018
You have been building to sell your business that you’ve put a lot of time, effort, and equity into growing, and now you’re looking to sell. Your objective is to get maximum value when selling and you’re assessing steps to prepare for the sale. You are trying to get the maximum price for selling your business, getting the best terms and finding the right buyer or looking for the best broker to sell your business.
We Analyzed 14,117 People Selling Their Business: Here’s What We Found
We purchase the last 5 years sales data and analysed over 14,117 transactions between $50,000 and $100million. As you can see from the graph above we found some interesting things:
- Average multiple of profit sold for 2.59 times profit
- Average sales price was $595,000
- 90% of deals were valued below $5million sales price
You will see the term ‘multiple’ used a lot. A multiple can be applied to a number of financial metrics in a business (such as EBITDA, net earnings, gross revenue etc.) to determine how much the business will be worth at sale. We calculate the multiple for the business in question based on profit, using SDE — seller’s discretionary earnings for business.
Here’s how we calculate what the business is worth:
Total Sales – Cost of Goods Sold – Expenses + Owners Wage = TSDE (your profit)
So, when we say that a business was sold for a multiple of 2.44X, for example, it means that the amount paid for the business is a value of 2.44 times the profit.
For example, a business that is doing $300,000 in profit per year sold for at 2.44X would have a sale price of $732,000 ($300,000*2.44=$732,000). This works in reverse as well — if a business sold for $732,000 at 2.44X, then ($732,000/2.44) means the profit was $300,000.
Here are the types of businesses we’re going to analyze in this article.
What to prepare for selling your business
General information consists of the regular information and is usually the first thing potential buyers will be looking at if they are interested in your business Here is a short list of some of the things you will be expected to have ready:
- Fact summary sheet, gives the most important information about the site all on one page
- Programs that the site uses and how to work those specific programs
- Security reports
- Index of every single page
- Media mentions, such as awards or publicity
- List of employees
Marketing information is going to be a big part of the buyer’s decision.
– Overall marketing strategies used
– Statistics within search engine rankings
– Keyword research completed and keywords that have already been targeted
– Visitor statistics, that includes their demographic information
– Competitor information and research
– Sales history and information regarding your conversion rates
The last section of information on how to sell my business you’re going to need is going to be legal documentation. They will be able to provide proof of ownership, transfers, history, and all other legal information your buyer might be interested in. Some of those documents are:
– Revenue documentation
– Expense reports
– profit reports
– ROI analysis
– Any appraisals
– Any contact regarding the sale
What a Business Broker Actually Does When Selling Your Business
The first thing you have to understand is what a business broker really does, and the answer isn’t short. They provide multiple different services that cover all aspects on how to sell my business. From the beginning preparation stages to the finalization of the sale, you will always have your broker working for you. The main goal of a broker is to connect a buyer and seller together, then make sure the deal goes as smoothly as possible. They will be able to place your business on the market and attract buyers, as well as make sure to sell it for as much money as possible. While this whole process might sound simple, let’s take a quick look at exactly what they could end up doing:
- Makes sure that the business is correctly priced.
- Conducts multiple types of evaluations.
- Archives any communication between both the buyer and the seller throughout the entire process
- Does comprehensive market research of similar businesses to ensure your asking price is correct and to understand the market.
- Produces a marketing strategy based on all of their research to help sell the business.
- Find Potential Buyers.
- Educate the buyers about the site and show them all aspects of it.
- Will assist in the price negotiations.
- Assists with completing all of the due diligence involved with the sale.
- Comes up with offer presentations and presents them to potential buyers.
- Ensures that all parties involved with the deal are fully aware of all the information as soon as possible.
- Protects the identity of the seller if they don’t want to be revealed.
- Will ensure that all paperwork is readily available and is kept safe at all times.
- Assists with the financial aspect of the process, such as transfers and contracts.
- Provides post-sale assistance if it is needed.
Where to sell your business
Selling on your own is best if you are selling your business to a family member or employee. Selling with a broker is best if you want to attract multiple buyers and maximize the selling price.
Here are some suggestions for best brokers to sell your business. (Full disclosure, if you want to sell an internet business choose us which is our specialty, otherwise more traditional companies we recommend the below):
7 Steps To Sell Your Business
The selling process is fairly straight forward but can be more complex and take more time depending on the size of the business. In general, most sales will be structured like this:
- Get A Valuation
- Prepare Your Financials
- Develop Your Prospectus
- Market Your Business
- Field Offers
- Due Diligence
How long will it take to sell my business?
The average process it takes to sell a business is 6 months. Simpler deals take shorter timeframes, more complex deals take longer timeframes.
FAQ’s On Selling A Business
How much do you sell a business for? – You can sell your business for what the market will pay. It is the buyer that determines the price of a business. As it the market that determines value. That being said. A business is generally worth a multiple of the earnings. That means a value applied to the profit of your business.
How can you sell your business quickly? – You can sell your business quickly by having it priced correctly. Everything can be sold for the right price and terms. One of the best ways to sell your business quickly is to offer it to someone with no up-front payment and an earnout based on performance. This can be to your business partner, employees, competitors or someone in your network.
How do you price your business for sale? – You price your business for sale depending on how much money it makes. It you are making no money it is price on the value of assets. If it is making a little bit of money it is sellers discretionary earnings. If it is making a lot of money it is a multiple of EBIDTA.
How long does it take for a company to sell? – Generally the larger the deal, the longer the timeframe it takes to sell a business. At Business Exits we average about 7 months to close a deal.