If you are a business owner in Ladue Missouri, there will come a day when you look at “how to sell my business” as the main question you ask yourself and perhaps the first thing to type in the search box in Google or your favorite search engine. When you type in “how to sell my business in Ladue ” I am sure you will find all kinds of information on just that. I have compiled 7 of the things most business owners don’t know about or don’t think about before that day (or the day of) that would certainly make the day you do sell your business a more profitable one. Most companies who visit with us are looking to find out what their business is worth first. Most business owners have no idea what their company is worth. Wouldn’t you like to know about what it is worth before you hire a Ladue business broker (we’re not brokers, by the way)?Before I go into all that let’s look at the 7 biggest mistake business owners make when they get to the point of asking “how to sell my business”1. They assume they “know” what their company is worth and make up a price – Look the first problem with this approach is that your business is usually “your baby”. If you have owned your business for a long time you know that you have spent more time with it than perhaps even your family, spouse and kids! It’s always there, even in the back of your mind………and sometimes it is hard to understand why someone can’t see your business worth the way you see it. That’s okay, but it is better to have a certified 3rd party give a certified opinion or appraisal of your business.Look at it this way, if you and I were going to go downtown and buy the Hilton Hotel, we would find a qualified appraiser to give us his professional opinion, wouldn’t we? We certainly wouldn’t take the owner’s word for it or even their accountant’s word for it. We would want an independent opinion and official analysis.But you say, hey my business isn’t worth that much to justify the cost. What? Even if your business is only worth $25,000, at least you would have an official 3rd party appraisal and a “floor” price you could start at. And with the discounts available when you go through someone like valuationbroker.com, you could literally add thousands if not tens of thousands to your sales price, and only pay a small percentage to have it done.I would not even consider selling any business without this step, no way, ever.You see, most business buyers are smart, like you, they have done a lot of right things to get where they are and unless they have recently inherited the money, they are sophisticated to a degree and will do their homework when looking for a company to purchase. The real advantage to having your company appraised first (by an independent 3rd party certified appraiser) is that you are the one driving the appraisal, not the buyer.2. They ask their accountant what their company is worth and use that number – You accountant is probably a very smart individual, however when coming to valuing a business or having one in on the sales process, I have one rule. I make sure they have been in on at least 10 business sales in the past 12 months, no exceptions. I have seen more deals killed by well meaning accountants. Don’t make this mistake.I don’t care what your accountant thinks your business is worth. I don’t care what MY accountant thinks your business is worth. I want to know what the market tells me.
So that’s why I want an independent look from a qualified third party to tell me the current “market value”. I have seen hundreds of business owners make this mistake and it can (and has) literally meant the difference of getting only half of what they could have! Half!What’s also most interesting about accountants is that they tend to favor using the book value of your business as a starting point and not the market value. Big big mistake. You’ll leave a ton on the table this way. Don’t do it!3. They take the number off their balance sheet and say that’s what their company is worth – You balance sheet tells you the hard value of the assets you have, that’s it! It doesn’t take into consideration what the value of your assets are that have already been depreciated or your blue sky value, or good name, or customer base……….all things that can add tremendously to the bottom line value of your business!4. They read a few articles in INC magazine and guess a number (even saying something like “companies in my industry are selling for 3 Times earnings”) They may even refer to their latest tax return for a number – Don’t be fooled by this! There are so many variables even with similar businesses in the same industry. The true value of your Missouri business is NOT the same as the guy down the street, even if you do the same thing! The true value of your Ladue business is NOT like real estate, where you can compare with the property down the street.That is like saying the space shuttle is like a bicycle. True they are both forms of transportation, but one is a bit more complicated than the other. Again, have it appraised by a “market appraiser”. Best money you will EVER spend. Ask ANYONE who has EVER sold a business! 5. They trust a FREE tool on the internet to give them the value of their business – While these free tools are valuable to help obtain a “range of value” (we have one too), they are not the complete answer and you can’t use them to justify your asking price. If you have a properly done market appraisal, it will include a “justification of purchase price” section that says, “this is what your business is worth in this market, and here is why it is worth that”That is such an important step. Buyers are smart and want to know how you came to the price you did. Now you know what to do so you can stand behind your price.
Plus you will know just what the market is doing. It isn’t the accountant or the balance sheet or your uncle attorney that dictates the price, it’s the market! So knowing this, it is important to know just what the market price is. I have seen market prices be twice what the accountant says the business is worth!6. They haven’t made their business run without them – This is a no-brainer, yet many business owners don’t think of it. Your business will be worth a lot more if it can run without you there. Otherwise whoever buys it will be buying a “job”. Nothing wrong with that, but realize, those businesses just are not worth as much when you go to sell them.7. They hire the wrong attorney to help them with the final paperwork (the wrong attorney could be their best friend) – This is just like the accountant, unless the attorney you use has closed 10 or more deals within the past 12 months, don’t use them! So many well meaning attorneys have killed countless deals, UNNECESSARILY!I wish you well and hope you take these things to heart (and action). I have seen so many sellers walk away with a lot less than they could have, had they JUST used these few tips!Good Luck, I wish you continued success! (don’t forget to get a certified third party, independent report for your business BEFORE you list it to sell) You’ll be glad you did! Buying a business? Use the same concepts! Cheers!
The Best Ladue Missouri Business BrokersOne of the first questions business sellers ask me as a business broker in Toronto, Ontario is "what are your fees?" Business owners contemplating the sale of their companies generally consider fee structure a very important criterion for the selection of a broker to work with. The business brokerage/Intermediation/ Mergers and acquisition markets offer a variety of fee structures depending on the size of the transaction and the nature of the services offered.Businesses of less than $100,000 in value generally sell through Real Estate Agents who sell mostly real estate and a few businesses on the side per year. The service offered is merely putting an ad in MLS and showing potential buyers the business. The seller does most of the selling and answers buyers' questions. The Real Estate salesperson charges a flat fee of $10,000 or 10% of the value of the transaction on closing. A real estate agent can hardly make living selling businesses only because a large percentage (over 90%) of these small businesses never sell.Businesses between $100,000 and $1M in value generally sell through business brokers/Intermediaries. In the province of Ontario, Canada and some US states, business intermediaries need to be real estate licensed. These brokers tend to offer a wider range of services including, business valuation, exit strategy consulting, preparation of a sales package or an offering memorandum, buyer screening and confidential marketing etc. Their fees generally range from 8% to 12% of the price of the transaction and is generally paid on closing. Some intermediaries charge a non refundable retainer between $1000 at $10,000 after signing the listing agreement. Businesses of these sizes generally have higher probabilities of selling because they are more professionally prepared for the sale. Because of the absence or the small amount of retainer charged, the number of sellers changing their minds about selling in the middle of the sale process tends to be very high. Some sellers tend to simply taste the waters to see how much their businesses are worth with no intention of selling. This ends-up costing a lot of time to business intermediaries.Businesses between $1M and $5M in value tend to sell through business brokers/Intermediaries who specialize in the lower middle market segment. These are more sophisticated business brokers who generally have a good understanding of Finance and Business Strategy and have the necessary people/sales skills to help in the long and tedious negotiation process. These intermediaries generally help in the business evaluation and provide advice to business sellers to maximize the business value. Some intermediaries prepare a short business summery of a few pages with summarized business information and industry analysis. Some but not all of these intermediaries charge a non-refundable retainer between $2,000 and $20,000. The success fee/ commission charged on closing of transactions is generally 10% of the first million dollars and 1% to 5% of the balance. This segment of the brokerage industry has been impacted the most by the Internet and the profession has been open to new entrants who do not have deep connections within traditional industry players. Business listings are simply advertised through large business for sale websites and generally attract a large enough pool of buyers to locate a serious buyer.Businesses between $5M and $50M in value are sold through Mergers and Acquisitions Intermediaries/Advisors. Those professionals generally process more advanced finance skills and are capable of detailed business valuations. They also offer more extensive sales package for the businesses to be sold. The sales package involves an extensive interview with the business owner and some key employees and a determination of the key success factors for the business, a detailed industry analysis and potential synergies and/or opportunities for expansion for potential buyers. Because the sales package involves a large number of hours of work, most M&A (Mergers and Acquisitions) Intermediaries charge a non-refundable retainer between $10,000 and $50,000. Charging a retainer also insures that only serious business sellers will list their businesses. While this practice tends to reduce the number of potential listings that an Intermediary will have at a certain time, it does insure a much higher quality of listings, meaning motivated sellers and realistic prices. On top of the retainer, these intermediaries charge a success fee using the Lehman or Double Lehman formulas. These formulas consist of charging a declining percentage on each million dollar of value ( 5% of first million + 4% of the second million + 3% of the third million + 2% of the fourth million + 1% of any balance) or (5% for first and second million + 4% for third and fourth million + 3% of the balance).Businesses with over $50M in value generally sell through medium size and large investment banks and have more complicated fee structures.