Frequently Asked Questions: Selling a Business
- How much is my business worth?
- How quickly will my business sell?
- How can I market my business without my employees or customers finding out?
- Once my business has sold, what will I do with my life?
- Why would I use a professional intermediary versus selling my business myself?
- How much do you charge for your services?
- What kinds of buyers are you connected with?
- When is the best time to sell my business?
- What are the taxes associated with selling a business?
- Will I get paid in one “lump sum” or in payments over time?
There are many elements that dictate the worth of a business – such as cash flow, equipment values, historic financial performance, lease terms, location, recurring revenue/repeat customers, competitors and the economy. Potential “strategic fit” and efficiencies of scale or eliminating redundancies also will come into play for strategic buyers. A Viking intermediary is capable of analyzing your business and comparing it with your competitors and recent transitions (“comps”) to reach the best price for your business. The documented evidence that we use to determine the value of your business will also assist in securing qualified buyers who are willing to pay the maximum price.
At the end of the day though, it’s “worth” whatever the value of the best offer is. For this reason we’ll also advise you on how to set the asking price based on many factors. Our intermediaries will counsel you on all aspects of this.
Over our 20 year history, our clients have sold their businesses on average for 95% of the asking price.
The market has strengthened since the economic downturn of 2008/2009 and we have seen a steady increase in the speed in which businesses are selling. We are having our best year, which means it is a great time to sell. The time to sell can vary based on a number of factors, but we’ve had several businesses get offers within the first 30 days, and close within 3 months! On average over our 20 years, the average is 6 to 8 months from start to closing.
It’s also important to realize the different elements in selling a business. Once the business is officially listed, the marketing, on a very confidential basis, begins and we will review your business with qualified prospective buyers (with your approval). When a buyer wants to buy your business, they will typically submit an “offer letter” with the price they are willing to pay and outlining the applicable terms. At that point, you have a tentative deal, pending “due diligence”. Due diligence is a period where the buyer will check facts, review financials, and make sure that the information they had based their offer on is indeed accurate and representative. This period can vary in length but we generally want to limit it to 14-21 days as we do not want the business off the market for a prolonged period of time. With financing and legal documents to prepare and finalize, the entire process from offer to closing/funding typically takes 60 days.
At Viking Acquisitions, we take great pride is our ability to keep all information confidential. At no time will the name of the company, owner or even geographical region be revealed. Any serious buyer is required to sign a confidentiality agreement to protect the seller’s interests, and will then be presented to you as the seller for your approval, before they will see the name or any other confidential information about your business.
We hear this from many of our clients who are too young to retire and our answer is: anything you want! Once you have cashed in on your business, you now have many options as an entrepreneur. Most Sellers in this position take time off to recharge their batteries and start or buy a new business in a different industry. We have found that a successful entrepreneur can apply his or her success in one business to just about any other type of business. The choice is yours!
Selling a business, especially for the first time, can be stressful and difficult to navigate. A Viking intermediary has tremendous experience and we take care of the marketing, paperwork, and buyer screening for you and we do so confidentially. By using an intermediary to sell your business, you are also giving yourself leverage; your agent will be working with a pool of buyers versus you working with only one to try and make ends meet.
Another benefit to using a brokerage firm like Viking is that we have an existing pool of hundreds of qualified buyers who are actively looking to buy businesses in various industries. For this reason, it is not uncommon for us to receive significant interest and in some cases offers within a few weeks of listing a business.
And last is the analogy of you hire a CPA to do your tax return and you hire an attorney to help you with legal issues, you also need to hire a professional when it comes to selling one of your largest assets-your business. Selling your business is one of the top 5 things you will do in your lifetime!
You don’t pay anything if your business doesn’t sell. Our fee is a percentage of the sale, and is only paid once your business is sold. Thus, our interests are aligned with yours, meaning we do not get paid until you get paid. It’s also in our interest to sell your business for the highest price possible. We do not ask for any retainer fee. We are performance based! Contact us to learn more.
We have an established network of qualified buyers throughout the Southeast that are interested in buying businesses with us, as well as those buyers we locate through our listing-specific advertising programs. We mainly work with four types of buyers; individual owner-operator buyers, financial buyers, teams, strategic, and private equity buyers. After selling over 500 businesses, we are able to determine a positive culture between the buyer and seller and ensure we find a buyer that can successfully run your business.
The best time to sell your business is when it is doing well. You want to sell your business when the profits are rising to ensure you get the best price for your business. The fact that your business is doing well will also assist is securing a buyer sooner rather than later.
That said, even if your business is not performing at its peak, we encourage you to contact us. We can discuss actions you can take now to best position your business for a sale in the future – whether that is six months out or five years out.
The purchase price of your business and the allocation of that price towards FFE vs. goodwill dictates how much you will pay it taxes, and also affects the buyer’s taxes as well. Most business owners are also able to treat the sale of their business as capital gains, and thus typically pay a lower percentage on that income than they would “normal” income from the operations of their business. This said, we must encourage you to contact a CPA before and after the sale of your business for details, exceptions and expert advice specific to your situation.
In most cases, sellers are cashed out at the closing of the sale, receiving a lump sum. Occasionally, the bank may require sellers to carry no more than 10% on a “Sellers Note”, but even if that is the case, the sell is still paid 90% at closing. Some sellers may also offer “seller financing” which means they are open to taken payments in multiple installments over a longer period of time. Offering “seller financing” is completely optional and up to the seller. From our experience, most sellers prefer to receive all or most of the purchase price in a lump sum at closing.