Selling A Business?

[flpanhandle]

I lurk here mostly, but over time I see alot of wisdom here I respect. Briefly,
I own a retail business that I established in 1995. It's been fairly successful I guess since we're still here. Not a big money maker but has paid a decent middle class salary and perks over the years. Well, I've decided it's time to move on. The 6 days a week dealing with the public has kinda burned me out.
Not that bad but takes a toll on the family never being able to take vacations, travel, etc. I have not ever been able to reach the point of absentee owner, and trustworthy employees are rare.

Enough rambling, I was wondering if anyone here has ever sold a business and if so can you offer any advice regarding doing this. I'm meeting with a Business Broker later this week to get the ball rolling.

Thanks

 

[TromboneAl]

Hi PanHandle,

I was in your shoes in May 2005, and this forum helped me brainstorm some ideas:

http://early-retirement.org/forums/index.php?topic=2872.0

My business was quite different from yours, but I sold it a year ago, and it's worked out quite well.

 

[SecondCor521]

No. We studied this very topic in my MBA finance class last week though. Basically valuing a business is somewhat subjective, but there are several quantitative techniques that a good business broker should use to evaluate what the company should sell for that should get you in the ballpark. The more these different methods produce similar results, the more you should be able to lean on those valuations. Beyond that it probably comes down to negotiating skills of the parties to determine the final price.

I also remember the presenters saying it can take from months to a year to sell a business, so be prepared for that.

2Cor521

 

[nwsteve]

flpanhandle

As was noted in earlier post there are several objective means to get to a sale value. A big variable is how quick you want to do the sale and the quality of your financials.
When talking with your Business Broker, I recommend you keep in mind the many comments made regarding dealing with real estate broker and then double or triple the cautions. In most states, business brokers are largely unregulated and as a results there are some questionable characters in the biz. Also they typically want a 8-10% of the sale price up front and that can take a lot of the intial value since most small biz are sold with owner financing.
If you trust your banker and they are more than a money handler, they can often give you some decent valuation ranges, as well guide you to the right resources. Some lawyers and CPA's have active practices in this arena and at least they have some level of professional code they acknowledge (following it is a different conversation).
Tell us more about your community and the type of retail, and you may get some other ideas from the group to help you get best value.
nwsteve

 

[flpanhandle]

Thanks everyone, please keep the ideas coming. A little more detail. Please forgive me for not being too specific, but my competitors would love to get wind of this. I'm in a resort area in the Florida Panhandle that was just named as one of the most likely continued growth areas by Fortune or someone like that. My business is in the furniture industry, but a specialty shop. There is still huge growth potential for someone wanting to pursue the still thriving resort industry. I'm just too weary to do it.

Hope that helps.

Thanks again.

 

[boathole]

I sold an internet videotape training business in 1998. I used a business broker who found several potential purchasers. Several checked out my books and office but none make an offer.

After our 6 month contract ran out, someone contacted him and eventually bought the business for my asking price! The broker got 10% of the sales price.

Since the sale took over 6 months, I had to prepare for not selling the business. In my case, I wanted out so I was prepared to close it down.

Valuing a business is like valuing real estate. That is, it all depends on who is doing the valuation. Since you have cash flow and income, it should be a bit easier for someone to estimate the value. Using net present value of your salary would be one place to start.

If you are going to put it on the market, you have to be prepared to show your books to others, including competitors. It will be hard to keep them away (they could always use a proxy just to get to see your books). You should also decide what you will do if it doesn't sell.

Ray

 

[flpanhandle]

Thanks Ray. I'm meeting with a business broker today. I plan to continue daily operations as normal, with worst case being staying in business until the remaining 2 years on my lease are complete.