Highest price selling a business
How do I get the highest price when I sell a business? Something I’ve always believed in from the start of owning my own business is that you always run your business as if it’s for sale. It may sound corny, a bit like wishful thinking or simply just not practical but it worked for me when I bought my first business some 30 years ago.
The business I bought was a turnaround. The owner of the business was absentee and that made it very attractive to me to buy and take my young family a 5 hour drive from where we were living and relocate.
What made it more attractive is that before buying the business I made a point of visiting the business and pretend to be a customer. As a customer I asked the employee that gave me their customer service some basic questions as if I planned to make a purchase. The answers the employee gave me were factually wrong not by a little bit but a lot. I then made a second visit to get another employee and the result was the same. Perhaps the employees did not care, there was no employee training or the owner did not know any better. As I came to find out, it was a combination of all of these.
The good news for me was that I was able to buy the business and after 12 months double sales and make the business much more profitable. Two years after buying the business I received a call from a broker to see if my business was for sale. It was not something I expected to happen but when I gave the price I was willing to accept to sell the business and the buyer and seller did not seem alarmed, the price and terms were negotiated and eventually accepted. The buyer naturally wanted to do their due diligence but as I ran the business as if it was always for sale, that was easy. The financial records were in good shape and up to date, I’d written down some basic policies and procedures and the rest, as they say, is history.
So what should you have organized in case you get that once in a lifetime phone call or a visit to ask if your business is for sale? The following is a pretty good checklist. Do not try and do everything all at once but make a point of starting or you never will. Add to this checklist anything that is unique to your business so the list is accurate, well rounded and easy to update.
- Tax returns for the last 3 years
- If a C Corporation, include the first 4 pages of 1120 tax return plus all supporting schedules and statements
- If an S Corporation or LLC, include the first 4 pages of the 1120S or 106, all supporting schedules & Statements of Explanation. Include Schedule K-1 for each shareholder.
- If a Sole Proprietor, included Schedule C and supporting Statements of Explanation.
- Profit & Loss statements and Balance sheets for current Year-To-Date.
- Name and phone number and name of Accountant
- Sales tax returns, Last 3 years Year – End Returns and Monthly Returns for current year.
- List of Furniture, Fixtures and Equipment at original cost.
- Copies of Equipment Leases (If applicable)
- Complete Copy of Lease (Including Landlord’s name and phone number) and Property Management Company (if applicable)
- Copy of Lease Assignment (If applicable)
- Copy of proposed new lease (If applicable.)
Other information (As applicable)
- Corporate, Partnership or Spouse Approval to sell the business
- Copies of Notes to be Assumed by Buyer
- Latest Health Department Report (If applicable)
- Copy of Franchise Agreement, Franchise Application and UFOC (If applicable)
- Approximate value of inventory at cost to be purchased by buyer. If inventory count was done by an outside inventory company, include the valuation report.
Selling a business comes with no guarantees however, being organized and prepared increases the chances of success.
Are you thinking about selling your business and move to your next challenge? Would you like to know the value of your business? If you would like more information please visit my website Business valuation.
For more immediate help you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.