Know what makes a business valuable.
In order for your company to look attractive to a buyer, you need multiple sources of income, a healthy customer base, and a solid management team in place.
One thing buyers don’t like? A business with only a few customers.
“If they lose any of those customers they are going to be out of business, and buyers are not going to buy those types of businesses. So every buyer looks at how well branded that company is and if that company has any intellectual property in place. They look to see if the company has any contracts in place that are perhaps transferrable,” she says.
And if you are your company’s only employee you don’t have much to sell.
“You really have to work on not only building your brand and your brand loyalty but also you’ve got to work on what you are best at and hire people in areas that you are not so good at… people smarter than you,” she says. “[Buyers] look to make sure that that company has employees and a management team in place because they don’t want to buy a job,” she says.
Keep it quiet.
The best way to ruin a business is to tell people you’re selling it because employees, customers, vendors, and landlords worry they won’t like something about a new owner. In fact, the only people who are happy to hear that a business is selling are your competitors who will shout from the rooftops that you’re “going out of business,” not “selling” your business.
“Selling businesses is very different than selling houses. Many people think it’s similar, but it’s two different animals. The real estate model is the more people you tell, the more houses you sell. In our industry, the more people you tell, the more businesses you kill. They end up going out of business,” she says.
Hire a good business broker.
If you can’t tell anyone you’re selling, how are you supposed to do it?
Seiler-Tucker says she has a database of over 5,000 qualified buyers looking to buy businesses all over the United States and she makes any buyer she works with sign a non-disclosure agreement so if the deal goes south her client’s business isn’t at stake.
But you need to be careful. In fact, she says many business brokers have about the same rate of success as business owners do in selling their own companies. The key, she says, is finding a business broker with a proven track record. To do that, she suggests asking any potential broker these questions:
- What businesses have you sold and in what industries? What a Murphy Broker can do to assist Murphy Business and Financial Corp have sold businesses in every category
- Do you have a database of buyers? We use Bizbuysell the number one line and many other sites as well as co-broke all our listings
- What are those buyers looking for? we qualify our buyers to fit your needs we both do not need tire kickers wasting our time.
- Do you own the firm? Yes we own our company
- If you don’t own the firm, who decides how much money is spent on marketing my business for sale? Marketing budget is what we s
- What is your closing ratio?
- On average how much more can you sell my business for? we like to set a price that is in a valuation of what the market will take and what a buyer is willing to pay. A valuation will be done and we can discuss a selling plan that works.
- How many listings do you have now? on Average, we like to keep our inventory low to have time to give to all our sellers.
- Do you have any testimonials you can give? sure do !!!
As for what you can expect to pay a broker, Seiler-Tucker says most small businesses selling for under a few million dollars shouldn’t have to pay any upfront fees but will have to fork over a cut of the selling price–usually between 10 and 12 percent.