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THE ADVISOR (April 2014)
 
The following is a monthly publication by IAG intended for the benefit of those receiving our newsletters.
 
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Why Sell?
 

Sometimes things happen and you just have to get out. Other times you are just ready for a change of pace. Your enthusiasm to build and work the business isn't really there anymore. Seriously ask yourself if you are still at least 75% as enthusiastic about building the business as you were in year one or two when you started. If you are like many people, you have done your best in the business for 3+ years and don't have the desire to make it any better or you really are ready to move on to the next business you want to build. Maybe it is time to just retire. That's something you certainly have to ask yourself every year that you are in business.


Here are the best reasons to discretely put your business on the market and attract a buyer:

  • You are bored of the business
  • The business is no longer satisfying to deal with every day
  • It's built up enough to cash out
  • You found something more exciting to be a part of
  • You really do wish to retire
The truly best time to sell a business is when it is making good money and you don't absolutely NEED to get out. This principle holds true for most things dealing with money: it comes much easier when you don't desperately need it. Ask your bank when the best time is to go for a loan. I promise they will tell you "whenever it's not necessary to have it". 

If you happen to be in a bad position like a divorce, partner dispute or illness then you probably can't expect to get top dollar for your company. But, I promise you that you won't get much at all if you don't use professional help to sell. Smart buyers will see your desperation very quickly if they are dealing with you one on one because there is no buffer between you and them. You will be fighting a losing battle.
 
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What's Involved in a Valuation?
 

I'm sure you are just as curious as any other business owner as to what your business is worth in today's market. The worst thing you can do is value a business yourself. The next worst thing is to ask your accountant. Here are the simplest reasons why this is a bad idea; you and your accountant have the same problem. You both will figure out some way to paint the rosiest picture possible and then get mad at the fact that it won't sell for that price. You love what you have built, and your accountant loves your money. He/she doesn't want to make you mad, right? On top of this, a key ingredient in the pricing will always be missing. If you don't have experience in the marketplace for your industry and area regarding business sales, you will never put that factor into your selling price.  

Buyers will always value lower than sellers, but given the ability to completely name their price, sellers will typically be way off the charts on their value perception. This is not like selling a house. There are no apples to apples comparisons. An identical deli that sold down the road for $300k does not mean yours is worth the same. It could be much higher or lower with revenues and net profit not being the only difference factors.

 

A company with revenues over $10 million and/or many big ticket tangible assets (like manufacturing equipment) should use a business appraiser to give them a true valuation. Any other smaller business is best to use a person in the buy/sell industry like a business advisor or business broker. I should point out that unless you are looking to shoot yourself in the foot on appraising and/or selling a business, DO NOT USE A REAL ESTATE BROKER. This includes a commercial real estate broker. They deal with buyers of buildings and houses, not businesses. 

 
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 What Should You Do?

 

So here's the bottom line. Unless you are extremely happy with coming to work every day at your business, consider selling it to a highly motivated (i.e. has the new venture fire), highly qualified (i.e. has the money) buyer and moving on to the next big venture. If you aren't ready to sell, get a valuation done anyway to see where your company stands in the market right now. You may find it is worth enough to consider selling or you might find out that some work needs to be done to be able to sell in the future.

 

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To determine how sellable your business is, learn about your sellability score here.  For additional information call IAG at 972-331-7365.
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Contact us directly at 214.272.4950 or by email to info@intlag.com to have an onsite analysis to determine marketability and sellability of your business.  

 
 
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Please let us know if you have any questions or would like to discuss the above articles with one of our trained Business Analyst.

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IAG 
1925 East Beltline Rd. Suite 550 
Carrollton, Texas 75006 
United States 
(214) 272-4950


About Us

IAG, LLC is a business intermediary consulting firm, facilitating the buying and selling of businesses. For more than 25 years the Management Team has been a leader in the industry and has helped the owners of privately-held companies "cash in" on all their hard work and get the best payoff possible.

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