What's my business worth?
You may have heard people say things like "businesses in this industry tend to sell for 4x EBITDA," or "there were seven other businesses that were similar to mine that sold for an average of 1x Revenue." While many people use very simplistic rules of thumb to estimate value, it can produce a highly inaccurate value. These approaches fail to take into consideration a variety of factors, including but not limited to: the business' growth rate, risk factors, margins, opportunities for growth, quality and longevity of staff, and the level of owner involvement / hours worked.
When Codiligent analyzes a business it starts by re-casting the financial statements to normalize earnings. Then a variety of valuation methods are used to estimate value that take into consideration cash flow, growth rate & projected growth, and risk factors.
Is my business marketable?
A great way to develop a better understanding of whether your business is marketable is to have Codiligent perform a Marketability Assessment. We will provide you with a questionnaire about different aspects of your business, then after you complete and return it, you will get a report that will give you a better understanding of what issues may be adversely impacting your business' marketability and value. Depending on the findings, a business owner may want to consider addressing issues before attempting a sale. The assessment is free to owners of businesses with at least two full years of operating history and a minimum of $1 million in annual revenue.
When is the right time to sell a business?
Just as stock traders have found that it is very difficult to consistently beat the market through timing of trades, it's never easy to know for certain the right time to sell a privately held company. Unless someone can see into the future, it's impossible to know whether it is better to wait a year or two, or sell now. However, when a business' financial performance is trending up and is expected to continue to do so, that's a very good time to sell. In contrast, selling a declining business is often very difficult. It also may be the right time to sell if you are simply tired of the business, have lost your passion, and are no longer putting in the time, energy, or creativity to continue growing the business. A business that isn't growing is, in essence, slowly dying.
How long will it take a business broker to sell my business?
We will sell your business in less than 30 days . . . just kidding. We wish we could make that claim but the reality is that most business sales take considerable time.
A timely process starts with choosing the right broker, preparing a business for sale and developing a marketing plan, but even after active marketing begins it would be highly unusual to get to closing in less than 3 months, and it is more common for the process to take 6-12+ months. Being well prepared for a business sale and using a quality business broker can help reduce the time on market.
Also, keep in mind that many business owners that haven't adequately prepared for a sale, and don't have quality representation, never complete a sale.
Why should I hire a business broker? I can do it myself.
Selling a business is a surprisingly complex and nuanced process, and for most business owners the sale of their business will be one of the largest and most important transactions of their lives. Even small mistakes made by the business owner can result in a lower price and worse terms, and may even derail a deal. Hiring a quality business broker will help increase the probability of exiting, and at a good price and terms. See the video Should you use a business broker?
Can my CPA sell my business?
In addition to expertise, selling a business requires a lot of time and effort. Is your CPA prepared to spend 10-20 hours per week selling your business over the coming 6-12 months? Will they be able to do so during tax season? In contrast, all that Codiligent business brokers does is help people sell businesses - this is what we specialize in. It's not just our primary focus . . . it's our ONLY focus!
However, your CPA should definitely be part of the exit team. You will want them to help you make sure your financial records are accurate and in good order, and understand and provide input on the tax implications of anticipated deal structures.
A buyer is already interested. Do I need a broker?
While finding prospective buyers is an important part of the business sale process, navigating the complex and highly nuanced business sale process to get the transaction to a successful closing while avoiding costly and potentially deal-killing mistakes requires far greater skill and expertise. Buyers often have a team of experienced advisors who may eat the lunch of an inadequately represented seller. A quality business broker’s or investment banker’s experience and expertise will often make or save a seller more money than their representation fee.
Should I sell my business to a key employee?
A sale to a loyal key employee may be a great way to transfer the business to someone you know, like, trust, and want to reward for their loyalty. However, a business sale to an insider may cause you to leave money on the table, and could be very risky. Can the employee put together the capital to complete the transaction? If not, it may necessitate you carrying a large seller note.
What if the key employee fails to complete the transaction? Will there be animosity or discomfort that might lead to the business losing the key employee, making it more difficult to sell the company to an external buyer?
Why are commissions higher than
real estate broker commissions?
Selling real estate is generally simpler than selling a business. It has fewer confidentiality issues, is more homogeneous, has fewer moving parts, a larger pool of buyers, has more financing options, more publicly-recorded information, and zoning and building codes create consistent expectations for use and building standards.
The greater time, risk, and expertise involved with selling a business makes a higher commission appropriate.
Aren't all business brokers the same?
There are dramatic differences in the quality and scope of services from one business brokerage to another. Some business brokers focus primarily on securing as many listings as possible, but then do little more than compile a few pages of high-level information on a business and place a few web ads. Others, like Codiligent business brokers, strive to provide a more comprehensive investment-banker-style service to small and lower mid-market businesses.
What does "Codiligent" mean?
"Co" = Partnership
"Diligent" = Preparation for Due Diligence; Persistence
The name reflects Codiligent business brokers' three key promises to clients: Partnership, Preparation, and Persistence.
Should I get an independent appraisal of my business?
Codiligent always does its own valuation analysis, but we recognize that some sellers would like an additional opinion of value, and we encourage this. This allows for comparison of methodology and assumptions, providing additional information that can be used to develop a pricing strategy.
If a seller client provides an appraisal completed by an independent certified business appraiser that's dated within six months of signing Codiligent's engagement agreement, we will credit up to $5,000 of that expense toward our closing commission.