Seller Frequently Asked Questions
What does the name "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.
"Diligent" = Preparation for Due Diligence; Persistence
The name reflects Codiligent business brokers' three key promises to clients: Partnership, Preparation, and Persistence.
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 0.8x Revenue or 2.7x Seller Discretionary Earnings". While many business brokers, sellers, and buyers will use rules of thumb or simple market comparable approaches, they may produce a highly inaccurate estimate of value. These approaches fail to take into consideration a variety of factors, including but not limited to: the business' growth rate, unique risk factors, margins, opportunities for growth, quality and longevity of staff, and the level of owner involvement / hours worked.
A comprehensive evaluation that looks at 5-7 years of financial performance, considers both qualitative and quantitative information, and uses multiple approaches to estimating business value will give you a better understanding of how the market will view your business' value. Codiligent business brokers can provide this service, and a service that may be even more useful is our Always Ready To Sell (A.R.T.S.) program - where we not only help you understand what your business is worth and what you can do to improve its value and marketability, we also track and update that monthly, and develop complete marketing packages so that is there is an unsolicited buyer you will be Always Ready To Sell.
A comprehensive evaluation that looks at 5-7 years of financial performance, considers both qualitative and quantitative information, and uses multiple approaches to estimating business value will give you a better understanding of how the market will view your business' value. Codiligent business brokers can provide this service, and a service that may be even more useful is our Always Ready To Sell (A.R.T.S.) program - where we not only help you understand what your business is worth and what you can do to improve its value and marketability, we also track and update that monthly, and develop complete marketing packages so that is there is an unsolicited buyer you will be Always Ready To Sell.
Is my business marketable?
A great way to develop a better understanding of whether your business is marketable is to have Codiligent business brokers perform a Marketability Assessment. We will conduct a highly focused interview with you for 1.5 - 2 hours and review some of your recent financial information. You will then be provided with a report that will give you a better understanding of what issues may be adversely impacting your business' marketability and value, which you may want to consider addressing before attempting a sale. This is free for owners of businesses with at least two full years of operating history and a minimum of $1 million in annual revenue. Codiligent's offices are located in Seattle, Washington, and Portland, Oregon but if you are located elsewhere the interview can be conducted by phone or by video conference using Google+ Hangouts.
When is the right time to sell a business?
Just as stock traders have found that it is very difficult in the long-run 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 take the business to the next level. A business that isn't growing is, in essence, slowly dying. Nevertheless, if you plan for a business sale a few years in advance, there may be things you can do to make it more marketable and valuable - see Marketability Assessment.
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. It starts with preparing a business for sale and developing a marketing plan, but even after active marketing begins it would be highly unusual for it to take less than three 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.
Why should I hire a business broker? Can't I just sell my own business?
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 life. Even small mistakes made by either the business owner or the business broker 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?
Don't all business brokers do pretty much the same thing - so shouldn't I just select the broker I like the most?
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 ads on a couple of websites. Others, like Codiligent business brokers, take their role very seriously and strive to provide large company investment banker style comprehensive service to small and lower mid-market businesses. See our document The Codiligent Difference to better understand specifically how Codiligent's services are differentiated from average business brokers. In fact, some of our clients are located thousands of miles from our physical locations in Seattle, Washington and Portland, Oregon but still prefer to work with us rather than someone local because of the difference in our service.
How do Codiligent business brokers find buyers for my business?
A customized marketing plan is developed for each client, and that plan is dependent on whether a business is appropriate for financial buyers, strategic buyers, or both. Some of the methods of marketing may include:
Would you like to learn more about the type of buyers in our database that might be interested in your business? See: Featured Business Buyers
- Advertising on top business sale websites
- Researching logical strategic buyers throughout the country and sending them introduction packages
- Ads on over 150 business and news sites including The Wall Street Journal, The New York Times, The Los Angeles Times, Bloomberg Business Week, and the Chicago Tribune
- Pay-per-click Google ads
- Blog postings
- Sending introduction packages to "connectors" (i.e. bankers, CPAs, attorneys, management consultants, other business brokers, etc.)
- Marketing through industry associations
- Sending introduction packages to appropriate Private Equity Groups
- Posting business offering details to a members-only database that is seen by over 14,000 professional deal makers
- Contacting appropriate buyers that are already in Codiligent's database of thousands of contacts
Would you like to learn more about the type of buyers in our database that might be interested in your business? See: Featured Business Buyers
My CPA said he could help me sell my business - why shouldn't I utilize his help instead of a business broker?
While some CPAs may have the skill and knowledge to successfully sell a company, that's not their primary focus. If your CPA does taxes then there's a high probability that if your business takes a normal amount of time to sell, that it will overlap with your CPAs very busy tax season and it won't get the attention it requires. In contrast, all that Codiligent business brokers does is help people buy and 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.
I've already identified someone who wants to buy my business, so I don't really need a business broker, do I?
Identifying a buyer is only one aspect of successfully selling a business. A buyer will likely seek counsel from a variety of experienced acquisition advisors. Having expertise from a quality business broker will be invaluable in helping not only negotiate the transaction, but also ushering it successfully to closing. If you aren't involved with business acquisitions and sales on a regular basis you may not even know what critical information you should be familiar with. Following are just a few examples of the types of questions you should be able to easily answer if considering foregoing professional representation:
If you don't have a clear understanding of this type of information, a quality business broker or investment banker can help you avoid making significant costly mistakes. Furthermore, it's always good for buyers to sense that others are competing for your business. This will not be the case If you only deal with one prospective business buyer. You may also find that despite the initial eagerness of a buyer, they may not end up going through with an acquisition.
- Do you know what your business is worth?
- What are the differences between the following approaches to valuation: rule-of-thumb, market comparable, excess earnings, capitalized earnings, and discounted cash flow?
- How much information should you disclose to a business buyer and when?
- What qualitative information does a typical buyer want to see in order to make an acquisition decision?
- What's the difference between a discount rate and a capitalization rate, and when is each utilized in a discounted cash flow approach to value?
- What's the mathematical relationship between a discount rate and a capitalization rate?
- How should your business' growth rate impact value?
- Do you know the difference between Net Operating Income, EBITDA, Operating Free Cash Flow, and Seller Discretionary Earnings?
- When using a market comparable approach to value is cash on the balance sheet assumed to be an asset of the business that transfers to a buyer or does it remain the seller's property, and if it is the seller's property is the business value reduced by the amount of cash?
If you don't have a clear understanding of this type of information, a quality business broker or investment banker can help you avoid making significant costly mistakes. Furthermore, it's always good for buyers to sense that others are competing for your business. This will not be the case If you only deal with one prospective business buyer. You may also find that despite the initial eagerness of a buyer, they may not end up going through with an acquisition.
I am thinking of selling my company to a key employee. Why should I try to sell to anyone else?
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 potentially could be very risky. Many employees have a limited amount of money for a down payment, and may not be able to get bank financing which may necessitate you carrying a large seller note. If an employee doesn't have the financial capacity to do a transaction, you may also feel compelled to moderate the price compared to what you may be able to get from a motivated external buyer, particularly if that buyer also will gain a strategic benefit from acquiring your company. What happens if your key employee has very little invested in the business and things gets difficult? Will they walk away from their limited investment? If you are carrying a significant note, what happens if the business buyer defaults? Can't you just take back the company and its assets? Not necessarily - what if the buyer puts the business into chapter 11 reorganization to hold off creditors (including you)?
Why are business broker commissions higher than real estate broker commissions?
Selling real estate is typically far easier than selling a business. Generally there will be far fewer confidentiality issues surrounding real estate, it tends to be more homogeneous, easier to value, there are fewer moving parts, there is more publicly recorded information on real estate, and zoning and building codes create consistent expectations for use and building standards. Businesses require a broker to spend far more time learning and analyzing the business in order to understand and package it, there are typically far fewer buyers, financing is not nearly as easy which means less people are able to afford to buy the business, the buyers usually require a higher level of sophistication to be comfortable completing an acquisition, and there are far more things that can go wrong during the business sale process (i.e. loss of a key client, employee turnover, vendor issues, labor organizes, etc.). It's not unusual for Codiligent business brokers to spend 300-500+ hours in the course of representing a client.
My business is not located in Seattle, Washington or Portland, Oregon. Does Codiligent business brokers provide representation beyond Seattle and Portland, and even in other states?
While the majority of Codiligent business brokers' clients are located in Oregon & Washington, and more specifically in the greater Seattle-metro area and Portland-metro area, successful representation has been provided as far away as Northern Virginia. Remote representation is feasible because our search for buyers in conducted nationally and our process is designed to screen buyers so that only the few who are the best fit, qualified, and have already extensively reviewed comprehensive information on the business with Codiligent, will be invited to have in-person meetings with the business owner. This limits disruption and time-wasting meetings for the business seller.
In contrast to Codiligent, many business brokers share limited information with buyers and do little screening before arranging premature meetings between the business seller and buyer. A business broker who takes this approach would not be able to provide effective remote representation because there would be too many in-person meetings that would require constant travel.
In Oregon, a business broker is required to be licensed by the state real estate agency. In many of the other Western US states, and a handful of states east of the Rockies, each state's real estate broker's license is required to provide business brokerage services. If you are located outside of Oregon or Washington please call or email us and we can determine if we are able to assist you. We'd love the opportunity to share more information about how our approach to selling businesses is equally effective whether you are located 10 blocks from Codiligent's Portland or Seattle office or 10 states away.
In contrast to Codiligent, many business brokers share limited information with buyers and do little screening before arranging premature meetings between the business seller and buyer. A business broker who takes this approach would not be able to provide effective remote representation because there would be too many in-person meetings that would require constant travel.
In Oregon, a business broker is required to be licensed by the state real estate agency. In many of the other Western US states, and a handful of states east of the Rockies, each state's real estate broker's license is required to provide business brokerage services. If you are located outside of Oregon or Washington please call or email us and we can determine if we are able to assist you. We'd love the opportunity to share more information about how our approach to selling businesses is equally effective whether you are located 10 blocks from Codiligent's Portland or Seattle office or 10 states away.