Sell My Business | Broker Near Me | Sacramento, California
If you are saying “sell my business with a broker”, then, hire Rogerson Business Services in Northern California to help you navigate smoothly the valuation and selling process, list your business confidentially, and get the most out of your business sale.
Work with a trusted and experienced business intermediary who knows how to maximize your business value before listing it for sale.
Let’s dive in!
What is the Process for Selling a Business?
Many businesses in California are owned by baby boomers who are looking to retire and exit their business ownership successfully. However, choosing the right broker will determine the business sale on your own terms.
To get started on the process of selling your business, here are five main steps that will get you to the finish line as a winner.
Step One: Define the reason to sell your business
Many entrepreneurs wait till the last minute in determining the faith of their business. Some simply choose to do nothing until it is too late. However, if you want to do this right, a transition plan should be in place where you can define all the steps in getting the business transferred to new owners.
Once you know the reason why are you selling your business, the next step is to start getting it ready for the sale.
Step Two: Get your Business Ready for Sale
But first, here is a little exit planning background with a business broker near you before we tackle the to-do list.
According to a recent study by Business Enterprise Institute (BEI): “79% of business owners plan to exit their businesses in the next ten years.
However, the survey shows that a majority of all business owners have not identified all of the steps necessary to exit their businesses successfully, and fewer still have created written Exit Plans.
Despite understanding the importance of planning for a successful exit, most owners have not identified all the necessary steps to exit their businesses successfully.
Fewer still have:
- Hired and/or trained employees to take over business responsibilities.
- Obtained a business valuation, both of which are critically important to a successful business exit, regardless of the chosen Exit Path.
- So, if you are a few years away from implementing your exit strategy, now is the time to start planning, obtaining a valuation, and getting the company in shape to sell and maximize the sales price. See sample valuation!
Now for the tactical steps, get the best and most experienced business broker to help you maximize the value of your business, and help you with the “need-to-do list” in the next few months if you plan to sell in 2022, or even in 2023.
First: Plan your tax returns now with your accountant to be first on your list of tax returns to be completed in 2022 or in 2023.
- Buyers and bankers prefer to see tax returns for the most recent year and will not give full weight to internally generated P&Ls.
- So, plan early, talk with your accountant, and get yours finished early – don’t get caught in the March/April crush with everyone else, and by all means, DO NOT plan on filing an extension. And a bonus corollary: while the 2018 Tax Cuts and Jobs Act expanded the number and types of companies eligible to use the cash method of accounting for filing taxes, weigh that choice carefully.
- Here’s why: tax returns are the source of choice (as opposed to internal P&Ls), and the accrual method is the method of choice for buyers, bankers, and valuations, as this method provides a more accurate picture of the financials and profitability of a company.
- So, if you are using the cash method already for your taxes or are going to switch, ask your accountant for cash to accrual reconciliation or conversion to go along with your tax returns. Or, have them put the cash to accrual conversion right there on the M-1. This step will provide the roadmap, via the balance sheet, of how the two different methods relate to each other.
Second, don’t Give Up $2 to Save 30 cents by expensing unverifiable, undocumented personal expenses that we (business brokers) won’t be able to add back to your cash flow calculation. Certain types of personal expenses are expected and easily added back (health insurance, life insurance, disability, charitable contributions, personal cell phone, some personal use of a car, some travel (e.g., for corporate board meetings with minutes), etc.) – but they share two common traits:
- They are easily identified, verified, and documented.
- They generally comprise less than 25% of the total seller’s discretionary earnings. Other types of personal expenses are not easily added back and directly reduce the value of the company (without even delving into the tax law/accounting questions).
- These include a myriad of expenses, such as groceries, excess personal meals, unverifiable/undocumented travel, household expenses, sporting equipment, etc.
- Here’s the math: assume a 30% marginal tax rate (on both income and the sale of the business, although this is probably a little high for the sale of the business as much of it will be at capital gains rates).
- For illustration, also assume that buyers are willing to pay for a company an amount equal to $2.85 for every $1 of seller discretionary earnings (smaller, less profitable/lower margin, stagnant revenue, or less desirable locations/operations will be less).
- For every dollar of personal expense that an owner runs through their company, they are saving 30 cents in taxes. However, when entrepreneurs go to sell their companies, every $1 of expenses that can’t be added back reduces their income and seller’s discretionary earnings by $1, reducing the purchase price by $2.85. Assuming a 30% tax rate on the sale (which is probably high), they are giving up after-tax proceeds of $2.
- So in one year, entrepreneurs are giving up $2 to get 30 cents. Almost a 7:1 negative trade.
- To prevent this, let’s say baby boomers’ business owners kept the personal stuff out of their books for 3 years (which would be ideal), they would be gaining $2 by giving up 90 cents in cumulative tax savings – a 2.2:1 trade, not a bad return in anyone’s eyes.
Third, now is NOT the time to aggressively manage your year-end taxes, particularly if you simply accelerate expenses and defer revenue recognition.
- This is more detrimental to your overall financial gain than Giving Up $2 to Save 30 Cents. In this situation, you are only saving the net present value of the interest income from a year’s delay in paying the inevitable tax but could be decreasing your company’s valuation and your gross proceeds substantially.
- At this point of your exit strategy, your financials should reflect the fundamental earnings capacity of the business so that potential buyers can clearly see the cash flow and profitability opportunity in front of them.
- Except for contributing to retirement accounts, paying for health, life, and disability insurance (all of which are easily documented and added back), and perhaps a few other items, have an in-depth discussion with your accountant and business broker. Also, leave the tax and accounting gymnastics out of the equation.
A corollary to this is the opposite approach of accelerating revenue and delaying expenses in order to minimize the impact of potential future tax increases. While the proposed increases not only have a long way to go, they will also only affect most sellers at the margin, and for those with capital gains over $1 million, there are reasonable and time-tested ways to mitigate those taxes.
So, while accelerating revenue into 2022 and delaying expenses into 2023 may sound like a good idea to avoid higher future tax rates, think about what that is going to do to the YTD comparisons for the rest of 2023, and then if still for sale in 2024, the 2023 comparison to 2022.
In an extreme case, it might make the sale transaction unbankable. In a more modest case, you may end up not Giving Up $2 to Save 30 Cents, but giving up $2 to save only 19.6 cents.
Fourth, if you still have a first or second-round PPP loan outstanding and have not applied for forgiveness yet, apply for forgiveness as soon as possible. While October 2, 2020, SBA guidance provided a path to consummating a transaction without defaulting on the PPP loan, there are still hurdles to be cleared to close your sale with a PPP Loan still outstanding.
The easier course is to get your application in, and hopefully forgiven, before your closing date.
Fifth, but not least important, continue to focus on revenue growth and bottom-line profitability. 2020, 2021, and COVID-19 have been difficult for many businesses.
- Positive trends show buyers that the company has a viable value proposition, is resilient, is competitive in its marketplace, and can generate the cash flow needed for the buyer to cover their debt service and earn a return on their investment.
- With a little planning, forethought, and discipline, your actions over the next few months can significantly improve the prospects of selling your company, successfully executing your exit strategy, and maximizing your net worth.
Step Three: Get a deal team on your side
California has so many more regulations, permit requirements, local ordinances, and more. If California were its own country, it would rank number 5 in the world, having just overtaken the UK as it stumbles through its Brexit complications.
Some of these regulations show up in the industries of the businesses Andrew Rogerson, Certified Business Broker, based in Northern California mainly serves business owners in Sacramento and all over the state of California, enjoy selling.
For example, the businesses in the Construction Industry where industry specialty requires its own contractor’s license as required by the California Contractor’s State License Board be it an HVAC, Roof repair, landscape gardening, floor tiling business, etc.
Manufacturing businesses are a little less restrictive unless you intend to expand or have EPA issues. Logistics and Transportation companies have California Department of Transportation and California Department of Motor Vehicle rules and regulations to navigate. Other industries where Rogerson Business Services: Wholesale distributors, and Professional or Business Services.
If you want to own and operate a Medical Practice in California, the owner must be a doctor with a license from the Medical Board of California.
There are many different Business Service companies in California and if there is a rule or regulation you can bet the State of California has found a way to generate a fee to help fund both the State and local governments.
Therefore, if you are serious about selling your business in California, it’s critical to have the right deal team around you.
There are many items to address in the successful sale of the business. A certified business broker’s role is to see the challenge and then reach out to the right member of the team to have it addressed. Attorneys handle legal items including contract preparation and related matters. Accountants handle the quality of the financial statements, which is a critical issue not only for the buyer but as we mentioned before, also if the buyer is getting finance from a third party. It is one of the reasons we suggest to a seller in a large business to have a Quality of Earnings Report done before going to market so the buyer and lender are comfortable with the financial statements.
Each transaction always includes a tax negotiation for the buyer and seller, so the right tax person needs to be part of the team.
As you have guessed, California does things differently and one of the additional layers to protect a buyer is the use of an escrow company to handle the transfer of money but also to ensure bulk sale laws are dealt with correctly, clearances from California State and Federal agencies is done and much more.
When you are ready to sell your business, make sure you have the right team in place to protect your interests and responsibilities.
Andrew Rogerson of Rogerson Business Services has been doing this since 2006, Rogerson has the right team members available as I want to ensure the sale of the business is successful – for both the seller and the buyer. You can email him at support@rogersonbusinessservcies.com or call him Toll-Free at (844) 414-9700
Step Four: Get a business valuation to maximize your business value
There are a number of things you can do to create value and make your business more attractive to potential buyers.
Let’s go over and discuss four key areas to focus on:
- Financials
- Growth Potential
- Brand and Reputation
- Operational Efficiency
Financials:
The first and most obvious area to focus on is the financials. This includes everything from ensuring that your books are in order and that you have an accurate financial picture of the business. It also means taking a close look at your margins and profitability.
- Are there areas where you can cut costs or increase prices?
- Can you negotiate better terms with suppliers?
- Are there other ways to increase revenue?
Benchmarking:
Your financials against similar businesses will give you a good idea of where you stand and what potential buyers might be willing to pay. This is called “benchmarking.” There are a number of ways to benchmark your business:
- Look at businesses that have been sold in your industry and compare their sale prices to their revenue or profit.
- Use an online tool like BizBuySell’s Business Valuation Wizard, which uses data from recent business sales to generate a valuation range for your business based on its size, location, and industry.
- Work with a business broker or experienced and certified intermediary, who can help you compare your business to others that have been sold recently.
Once you have a benchmark for your company’s value, you can start working on strategies to increase it.
There are a number of ways to increase the value of your company, and the best way to do it depends on your specific situation.
If you’re looking for ideas on how to create value for your company, here are a few to consider:
- Invest in marketing and sales: Growing your top line by increasing revenue is one of the most direct ways to increase your company’s value.
- Focus on profitability: Increasing your bottom line by becoming more efficient and cutting costs can also have a big impact on your company’s value.
- Build a strong management team: Having a talented and experienced management team in place will make your company more attractive to potential buyers.
- Create a niche market: Specializing in a specific industry or customer segment can help you command a higher price when you sell.
- Diversify your revenue streams: Having multiple revenue streams makes your company more valuable and less risky for potential buyers.
Whatever strategies you decide to pursue, keep in mind that it takes time to increase the value of your company.
If you’re patient and consistent in your efforts, you’ll be well on your way to maximizing your company’s value when the time comes to sell.
What tips would you add on how to increase company valuation?
Let us know at support@rogersonbusinessservices.com!
Marketing and Sales:
Marketing and sales are important for increasing revenue which then increases company valuation. Many times, a company will be valued based on its potential future earnings. This is why it’s essential to have a strong management team in place that can grow the company and make it more profitable.
Creating a niche market or specializing in a certain industry can help increase company value as well.
Last but not least, diversifying revenue streams is key to making your company more valuable and less risky for potential buyers.
By following these tips, you’ll be on your way to increasing the value of your company!
Let us know at support@rogersonbusinessservices.com!
Growth potential:
Another important area to focus on is its growth potential.
- What are the areas where your business could grow?
- Are there new markets you could enter?
- New products or services you could offer?
- What would it take to scale up your business?
This is an important area for potential buyers to focus on, as they will be looking at how they can grow the business.
Show them that you have a plan for growth and how they can achieve it.
This will help to increase the company’s valuation in their eyes.
Brand and reputation:
Brand and reputation are also important factors in increasing your business value.
- Do you have a strong, recognizable brand?
- Are you known for quality products or services?
- What is your customer satisfaction like?
These are all things that potential buyers will be looking at.
If you have a strong brand and reputation, that will go a long way in increasing your company’s value.
Operational efficiency:
Operational efficiency is important to focus on. This includes everything from how your business is run on a day-to-day basis to how efficient your processes are.
- Are there areas where you can streamline or automate?
- Are there ways to improve communication and collaboration?
- Can you reduce waste or unnecessary spending?
Working on operational efficiency can have a direct impact on your company’s bottom line and, as a result, its value.
Strategic thinking:
Of course, no matter how efficiently your business is run, it won’t be worth much if there’s no demand for what you’re selling.
That’s why it’s important to always be thinking about the future and how you can position your company to take advantage of emerging trends.
- What new products or services can you offer?
- What new markets can you enter?
By thinking strategically, you can ensure that your company is always growing and evolving, which will help to increase its value.
These are all things that can make your business more valuable.
By focusing on these four key areas, you can increase the value of your business and make it more attractive to potential buyers.
Step Five: Get your Financial and Due Diligence House in Order
Stay focused on the process. Review your business model, your financials, and other pertinent details. When conducting your due diligence with your broker, your goals are as follows:
- Ensure your historical financials are accurate,
- Support your future projections,
- Determine whether your business supports growth.
Here are some best practices when conducting due diligence for selling a business.
Describe the Organization of Your Company
Gather your articles of incorporation and by-laws. Describe who owns your company and who has vested control. Include stockholders, voting decisions, and all other information pertinent to this matter.
Review All of Your Financials with your Business Broker
Review your annual sales and profit and all matters relating to finances, including accounts receivable, business taxes, current investors, and a synopsis of your debts.
Make your review of financials as comprehensive as possible, which will help all parties involved. You can find additional information on financial due diligence here.
Review All of Your Legal Matters
Legal matters should never go overlooked because they determine how risky your business is. So gather your legal records and have them on hand. These documents should include lists of any litigation past or present and government investigations.
Regulations and Compliances
These documents would include permits, environmental matters such as site assessments or audits, and inspection dates. For a deep dive into these matters, this is an excellent source.
Compile Intellectual Property
Intellectual property includes trademarks or copyrights. List your intellectual property rights here as well. Include information about your IT department with this also. The way you protect your intellectual property is important.
Gather Appraisals or Certificates from your Business Broker
It is also a good idea to include human resources policies here. It would also serve you well to accumulate your tax and marketing information. For a comprehensive breakdown of the due diligence process, read more at this site.
The Due Diligence Report Done by your Business Broker
After completing your best practices checklist, you will need to move on to your due diligence report. Your due diligence report is paramount to selling your business. Working with your business broker can do the heavy lifting for you.
A due diligence report includes pertinent corporate records, copies of audited financial statements, any debt, all related real estate, any agreements that the company has entered into, employee and customer information, and copies of legal documents or licenses.
If you’re selling your business and planning to retire, it is essential to have a solid and structured due diligence report. Keep your topics simple. This template provides a comprehensive checklist. Your due diligence report should include the following topics:
- The Executive Summary: The outline of your key items and topics.
- Your Quality of Earnings (QoE): QoE works in tandem with the working capital portion of your due diligence report. Your QoE is where you will place non-recurring events and items that fall outside the day-to-day operations of your business.
- Your Working Capital (or Net Working Capital): Report your business’s operating cash flow.
- Income Statement: Reports your losses and profits.
- Balance Sheet: Outline your total assets. Your assets are financed through either your debt or your equity. A simple balance sheet includes your total assets, total liabilities, and total shareholders’ equity.
- Supplemental Analysis: Detail your operations and distinguish yourself from your competition. Use this topic to explain your business identity, what you stand for, and what makes you valuable.
Is Selling My Business Right for You?
Some businesses are cash poor and so are struggling to keep their doors open. However, some of these businesses are rich in assets. If this is the case, a real option is to manage down the assets to either keep the business going or get the best price possible for the assets.
Keep in mind that business buyers are not excited about buying a business and managing it down to a smaller business. We have written an article that answers a question many business owners ask: “Should I Sell My Business?”
Types of Businesses for Sale
There are mainly three business-for-sale categories. But we are going to focus on two categories that Rogerson Business Services focuses on.
First: Mainstreet Businesses
A Mainstreet business is typically a business that is worth under $1 million. Rogerson Business Services works with business owners who want to sell their Mainstreet business that is worth between $500K and $1 million.
Second: Lower Middle Market Businesses
A lower middle market business is basically a business that is worth between $5 to $50 million. Currently, there are about 350,000 companies in this segment, compared to 25,000 companies with revenues between $100 million and $500 million (the middle market) and only a few thousand companies with revenues above $500 million (the upper-middle market), according to Forbes.
To see a list of current businesses for sale, please go to this link.
How Much Will Selling My Business Worth?
Rogerson Business Services offer a FREE seven-step business valuation plan to give you a general idea of what your business is worth, and you can activate that program by clicking here. Since this is the first step in selling your business, it is a great place to start.
If the process of valuing your business seems a bit complex, you don’t have the time to do it yourself, or if you need a more official business valuation such as the kind you will need for your potential buyer to seek financing, contact us today.
The Steps in Selling a Business
There are definite steps you can take to find the right deal when selling your business. Hiring a business broker can make the steps in selling a business a smooth and pleasant journey for any business owner who is considering selling their business and motivated to proceed with all the steps from start to finish.
The more prepared you are, the more likely you are to profit. Getting your business ready for sale a year or two before the actual sale is ideal to get things in order and get the highest possible price.
You will profit the most if you get things in order and sell your business for the most value if you hire a good business broker in California, sell it at the right time, and have a good reason for selling it.
Here are the four steps:
Step One: Hire a qualified and experienced broker to value and sell your business
- When trying to sell your business, you’ll want to find a certified and qualified broker who is both knowledgeable and trustworthy.
- The general rule of thumb is that when it’s time to sell the business, you need a lawyer to handle the legal part and a business broker to handle the valuation and selling the business process part.
Step Two: Get a proper business valuation to know what’s your company’s worth
- There are many resources that can help with this process, including online valuation tools, business broker databases, and business broker associations. When researching valuation options, it’s important to consider several factors, including your company’s financial worth, comparables in your industry, and the current market value.
Step Three: Price your business for maximum profit
- The offer price is what you’re asking for from the people who are buying your business.
- The offer price may not be the same as the amount you’re ultimately expecting to receive for the business.
Step Four: Market your business for sale
- You’ll need to conduct thorough research to make sure you’re properly valuing your company.
- As soon as you have your company ready for sale, you need to start marketing it (confidentially). This will give you an opportunity to tell your prospective buyers what your business offers and what it’s worth.
- While you’re marketing your company in order to find the right buyer, you need to keep in mind that selling your business is an investment.
- Finally, your business is sold once your find a motivated buyer willing to pay your asking price.
Final Words: Hire a Broker to Sell my Business
When deciding to sell your business, you will likely go through a number of questions in your mind. Here are just a handful of many other questions that comes to mind.
- What is the value of your business?
- What should be the price at which you sell it?
- How can you find a buyer?
- How can you find a buyer who is interested in buying your business?
The answers to these questions will largely depend on the experience and network of contacts of your chosen business broker.
So, choose wisely a qualified business broker to sell your business in California.
Conclusion
Selling your business is a life-changing event. That’s why it’s essential to plan for this event carefully.
If you’re listing a business for sale in California, you’ll want to find a reliable business brokerage firm. At Rogerson Business Services a team of experienced professionals works to plan and carry out the buying and selling business process in California.
You can also consult with Andrew Rogerson on how to increase your overall value.
You might want to read further the Six Steps to Successfully Sell or Exit your Medical Practice in California
List of Resources That You Might Find Helpful
- Selling your business
- Get started on a seven-step process of selling my business.
- Get a business valuation
- Get started on a seven-step process of valuing my business.
- Selling your medical practice
- Selling your manufacturing business
- Selling wholesale distribution business
- Best calculations: How to value a wholesale distribution business
- Selling a professional services company or firm
- Selling a construction company
- Selling a trucking company
- EBITDA multiples for a trucking company | best calculations
- How to value a logistics company | find a company worth
Final Take: Broker to Sell My Business
While we’ve presented plenty of helpful tips on how to sell your small business in California, contacting a business broker near you, or preparing a business exit strategy can be the difference between selling your small business and almost selling your small business. It is estimated that only 25% of privately held small businesses actually sell. Increase your odds by getting a professional business broker to assist you.
Mainstreet businesses simply refer to a smaller company considering selling or exiting their business. Examples of a main street business exit planning include:
- The seller looking to retire or move into another venture.
- Several buyers may bid against each other, elevating your business’ value.
- You’re more likely to negotiate a higher price when you sell to a competitor as opposed to an outside party.
Additionally, using a Mainstreet business broker can help give you a competitive edge in the market and eliminate or reduce friction points or roadblocks in the selling process.
Is your business worth $3 million and above? See how to exit/sell a business in the lower middle market category.
Considering an exit strategy for your small business, let’s get in touch and we’ll walk you through the process by kick-starting a business valuation.
If you are considering valuing and selling your business or medical practice within six to twelve months, give Andrew Rogerson, a certified business broker based in Sacramento, California, a Call Toll-Free at (844) 414-9700 or email him at support@rogersonbusinessservices.com services the whole state of California.
This is part of the tips for selling my business in California series ->
