Fall 2007 issue of Horizons

GENERAL TOPICS

Selling Your Business

No matter what kind of business you own, there’s probably a buyer out there looking for it if the price is right. But finding the right buyer and selling the business on favorable terms requires planning and hard work. There are four major steps in selling your business - making the decision to sell and setting the purchase price, finding the appropriate professionals to assist you, preparing your company for sale, and going through the sales process. Selling your business can be rewarding but also challenging, adding a lot of time and effort to your existing workload. First you must establish what your business is worth and how much money you expect to receive. Usually, a transaction price is based on a multiple of earnings before interest, taxes, depreciation and amortization (EBITDA). The multiple varies depending upon industry, stage of the business and condition of the business. Business Broker Your team of professionals should include a business broker, accountant and attorney. A business broker will help you findpotential buyers. Buyers can be broken down into two major categories: financial or strategic. Typically private equity firms, financial buyers generally do not have operations in the industry. They are interested in the cash flow generated from the company and the future exit opportunities. Strategic buyers intend to expand their business and usually are in it for the long term. Business brokers have experience finding qualified financial and strategic buyers and will market your business in all of the appropriate places. Typically, you pay the business broker a deposit and a commission. Commissions vary from 1-8 percent of the sales price, and different deposits are required for different types of transactions. A business broker also will perform background investigations on potential buyers, ensuring they are capable of buying your business.

11 u winter 2007 issue