Three Critical Factors for Selling a Business

At Stokes Herzog Realty, we help people buy, lease and sell commercial property, but what a lot of people don’t know is that we also help people sell and buy businesses. That process is a little different. There are three critical factors you need to think about before buying or selling a business.

1. Get your money right.You must have your numbers ready in a solid, professional format for a presentation. This includes a balance sheet and a profit and loss statement. Potential buyers want to see good numbers presented in a way that’s professional. If you don’t have an accountant, it’s time to get one and you probably need to be running Quickbooks or another advanced computer-based online accounting system. That way, it’s a few simple clicks to get the numbers that a potential buyer, and more importantly, their lawyer and accountant will need to evaluate the business. 

2. Have a good idea on how much money you want to get out of your business and be able to justify it. Is it a multiple of revenue, or is it a multiple of owner’s discretionary income? It will have to be backed up with cash flow either way. Money coming in, money going out, debt, employees, and assets all factor into the price. A lot of business brokers will tell you most small businesses listed won’t sell, and usually it’s because most don’t meet that 2.75 times owner’s discretionary income test. So, start looking at revenues and start preparing your business to sell, several years before you need to or want to sell. That’s some good free advice and there are people like my friend Mike Finger at exitoasis.com who can help you get your business ready to sell. 

3. Will someone actually want to own and run your business? More importantly, can they run the business without being involved in the business? It’s a matter of working on the business, versus working in the business. Here’s the holy grail, a business that makes good money without the owner ever being involved. This is called a “passive income” in the business. If you have a business that makes money, there are time tested and perfected systems in place, and you don’t have to spend time messing with it; that’s a dream business that will sell and probably for a good price. 

If you’re serious about buying or selling a business, remember to fill out the contact form on Stokesherzogrealty.com or email me at chris@stokesherzog.com. We’ll get together, evaluate your business, get it listed and get it sold for you.

Stokes Herzog Realty LLC is Eau Claire, Wisconsin’s commercial real estate brokerage firm. Our team of professionals represent tenants, landlords, buyers and sellers in every facet of commercial real estate. Throughout the State of Wisconsin, Stokes Herzog Realty LLC specializes in tenant representation, property acquisition, surplus disposition, leasing services and investment sales. We look forward to working with you!