Too busy to sell your business
Over the last month or so I hope you have successfully embraced this time of year by slowing down and enjoying things that are important to you.
If you are into New Years Resolutions, I hope they are successful. I must be getting old, but I’ve decided if something is important to do, do it now rather than plan to do it.
If you’re a small business owner, what do you see happening in 2019?
If you look at the Stock Exchange at the moment, you’d have no clue. Typically, the Stock Exchange is forward looking. That is, if the investor is a buyer of shares in a company they do so because they think the company will be worth more in the future. If the investor sells shares in a company, they think it will be worth less in the future.
If you look at the current national unemployment rate, we are at full employment; it doesn’t get any better than that.
If you look at Interest rates they are going up. This means the economy is strong as the Federal Reserve tries to constrain the growth of the economy so inflation doesn’t get out of hand.
If you look at Federal and State budget deficits, however, it’s a huge cause for concern as the budget deficits continue to grow and at some point, is going to hurt the future performance of the economy servicing all the debt.
If you look at what’s happening in politics in Washington, DC…you shouldn’t.
Thinking of selling your business
If you talk to most business owners, as I do daily, you will find 2018 was a very strong year. Despite all the political noise and “everyone is selling and moving out of California;” that’s not the reality. Sure, people are moving out of California, but others are moving in and buying homes and businesses. It’s a very attractive place to live.
One of the things I can tell from talking to a lot of the business owners calling me is that they are ready to sell their business, but they don’t have the time to focus on it. This is the wrong approach and a huge concern to me as it means the business won’t get the best price for the owner; if they are able to sell it.
When is the best time to sell a business?
There is no doubt, the best time to sell a business is when it is performing and performing strongly. Not only is this attractive to a buyer but it’s also attractive to a third-party lender.
A lot of the businesses I sell are with the buyer obtaining an SBA loan. From talking to several SBA lenders, its normal for them to look at 12 businesses and have just one of those businesses approved for a loan. Yes – you read that right. Only 8½% of SBA loans are approved; the other 91½% of loans are declined.
The reason loans are declined are many but mainly include the buyer not having the right business and management skill for the business they wish to buy, not enough downpayment and/or a poor credit report. In addition, loans are declined because the lender is uncomfortable with the quality of the financial statements the seller is providing or the performance of the business is declining meaning the buyer and lendor are taking too much risk.
The best time to sell a business is therefore not only when the economy is strong and doing well but also the business. After all, if you were buying a business do you want to do this when the sales are declining? How do you know the bottom of the market or business cycle for that business?
Steps to sell a business
If you own a business and are thinking of selling your business soon, the steps are simple.
Step one to sell a business
The first step is to get a business valuation. The business valuation is important as not only does it summarize the financial performance of the business over the last 3 to 5 years for the seller, but it provides a road map of the business performance which a buyer will want to see. Additionally, if a buyer needs to get a loan, this information is required by the lender.
If you would like to know the value of your business, click this link to see a sample business valuation.
Step two to sell a business
Once the business has been valued, the next critical step is to put all the disclosures and marketing information together about the business. These marketing documents are critically important as a seller needs to make disclosures to a buyer so there are no negative legal problems later.
Many steps to sell a business
Here is a link to an executive summary of the steps to sell a business. It breaks down the many steps and nuances in the successful sale of a business.
If you are ready to get on with selling your business, give me a call on (916) 570-2674 and let’s have a conversation. To put a business valuation together for you I would require the tax returns for the last 3 years of the business, a current Profit and Loss statement and a recent balance sheet.
My responsibility would be to help you through all the steps to successfully sell your business while you stay focused on its running and operation.