Anyone Sold Their Own Business?

[Swetch]

My wife and I have owned a small but successful business for 20 years. It has an EBITDA of roughly $650k and $500k in inventory assets. We're ready to retire and would like to sell it. We have both searched online and found plenty of companies that offer services to sell businesses, but then having read their reviews I'm a bit worried about getting scammed. Some reviews even mentioned that the sale never went through and they still paid a hefty commission to the broker. I'm not sure if we are too small to even use a broker for this.

So we're looking for some advice from any ER members who have sold their business through a broker or otherwise. Any pitfalls, recommendations, etc?

 

[Stormy Kromer]

I started working at a small business when I was 18. I bought it at 21 and sold it at 50. I groomed my own replacement, I hired him 3 years before the sale and taught him the business. I sold it on a 10 year contract with no money down.

It has worked well. We didn't use a broker but I did have a professional appraisal. EBITDA is one of the tools used in the appraisal, but not the only one. A growing business is worth more than a stagnant or declining business.

I could have gotten more money by selling to another competitor, but that's not what I wanted.

If I were you I would start with an independent appraisal. It gives you credibility with potential buyers and their banker. Plan on this taking a couple years. Taxes are a consideration, get your tax professional in on the deal early. If offered a cash sale or contract sale again, I'd take the cash money and pay what you owe in tax and invest the rest.

Good luck to you both.

 

[Scrapr]

I did what @stormy Kromer did. I had an accountant/CPA do a EBITDA over a period of 3 years. She came up with a range of prices. I recruited a individual to take over. Trained him in the business. Made sure he could sell the services. After 2 years we signed a sales agreement. He is paying me out over 5 years. During his 2 year training I hired a business coach to help him. Then after the sale we used the coach some more.

I probably could have got more by going outside. But that would have involved a broker & commission. And would have spent considerable time cleaning up my books & building the sales book. My wife was Dx with cancer at the time & I wanted to be with her instead of at the office

I listened to a podcast called Built to Sell radio. It's interesting. I listen to it now even though I'm out.

https://builttosell.com/radio/

*remember you also have the working capital as an asset

 

[Ronstar]

I bought a portion of our business in 1992. Sold off chunks a couple of times to employees and sold the rest in 2013 before retiring in 2014. I can barely remember it, so it must have gone well.

I Did not sell through a broker, so I can’t help you there. My original partners and I explored a sale by broker, but found that private sales to employees worked out better for everyone involved.

 

[Koogie]

I am in the process right now (about a quarter of the way into the earn out).

We sold to another company in the same industry.

Ours is a service company. It sold for a multiple of annual gross profits, which is the more common metric for service companies in our industry.

 

[COcheesehead]

I sold my business. Successful, 24 year old enterprise. I did a 5 year buy out to three key employees. Everybody parted happily. Your buyer may be someone you employ.

 

[Swetch]

Thanks to all.

I don't have any employees who would want to take this over. Selling to a competitor is our most likely option but I'm not sure where to begin other than to get an appraisal. But then I've got to worry about confidentiality agreements and actually getting out there and trying to sell the business. Seems like a business broker would be viable option but there are a lot of bad reviews about these types of companies online. This could be the biggest transaction of my life so I'd want it to be done fairly.

Ideally, I'm hoping someone here can make a suggestion for a reliable and honest broker with whom they have had a good experience. A bit of a shot in the dark.

 

[rmcelwee]

We were very early into the dial up internet business and sold it in 1999 right before the dot com bubble burst. We went through a broker and they slowed the process down to a crawl. How? I can't really remember but I was always upset with them. We sold for 50% cash and financed the rest. The buyer went belly up and we sold it again to someone who worked for him. Then he went belly up as well and we just let it die. I often think that one big change that I would have made would have been to act as selling my business was my new job. Forget about running the company and just concentrate on selling. There was a lot of crazy and stupid money out there and I kind of missed out on it. Of course, it was a very strange time and business so I don't know if much applies to what you are doing.

 

[Stormy Kromer]

Thanks to all.

I don't have any employees who would want to take this over. Selling to a competitor is our most likely option but I'm not sure where to begin other than to get an appraisal. But then I've got to worry about confidentiality agreements and actually getting out there and trying to sell the business. Seems like a business broker would be viable option but there are a lot of bad reviews about these types of companies online. This could be the biggest transaction of my life so I'd want it to be done fairly.

Ideally, I'm hoping someone here can make a suggestion for a reliable and honest broker with whom they have had a good experience. A bit of a shot in the dark.

You don't have an employee interested.....find one. Hire them and teach them the business. You should have done this 5 years ago.

Get involved with trade shows and meet up with interested prospects. Don't wait for someone to beat a path to your door,,,, pave it for them instead.

I bought blue sky,,made a lot of money and sold it for more. Create your own exit strategy

 

[COcheesehead]

Thanks to all.

I don't have any employees who would want to take this over. Selling to a competitor is our most likely option but I'm not sure where to begin other than to get an appraisal. But then I've got to worry about confidentiality agreements and actually getting out there and trying to sell the business. Seems like a business broker would be viable option but there are a lot of bad reviews about these types of companies online. This could be the biggest transaction of my life so I'd want it to be done fairly.

Ideally, I'm hoping someone here can make a suggestion for a reliable and honest broker with whom they have had a good experience. A bit of a shot in the dark.

If you know your EBITA, ask around your industry as to what the EBITA multiple is for businesses that sold. You’ll at least have a ballpark asking price. I would also put the word out in blind ads in as many places that would allow these. The industry that I now work part time in (wine) had almost all recent winery/vineyard sales by word of mouth.

 

[427Vette]

I also am right in the middle of the process of selling my business so it’s very fresh in my mind. If you are afforded the time Stormy offers good advice about hiring an employee who could take over. However if you are done and ready to move forward now that may not be an option. I hired a broker and it went absolutely wonderful. He obviously knew all of the ins and outs of the process and we didn’t…. He made sure we kept our business operating as usual while he took care of the deal. He said that he has seen businesses fail because the owners get to involved in the sale and no one minds the store. There was a tremendous amount of paperwork and constant financial updates that were required. It would have been impossible for my wife and I to accomplish the sale on our own.

In the end I ended up selling it to our employees. I had bigger offers from outside buyers but I wanted our guys to take it and run it like we did. They are doing a 3 year buyout with a ballon payment at the end.

I found a few competent brokers by talking with other people we did business with, insurance guy, accountant etc. Try asking around for a good referal from your contacts.

I wish you the best of luck. Keep us informed.