Mike Bigrigg, CPA/ABV lets you in on the important aspects of preparing for a business sale:
Selling a company can be a daunting task for a small business owner. With countless legal experts, consultants, bankers, and accountants from which to choose, a small business owner may be asking, “What services do I need and who should I hire?”
One very important and often overlooked step in the process of selling a small business is obtaining a valuation from a business valuation expert. A business valuation will provide the following benefits (among others) when selling a business:
- Set an objective baseline expectation of the sale price
- Compare the potential transaction to similar transactions that have recently taken place
- Unveil issues or opportunities that the business owner may have not realized existed
- Identify normalizing adjustments that can potentially increase the value of the business
- Identify and address accounting or tax issues to better position the company for sale
Recently, a client of ours received an unsolicited offer to purchase her business. The offer was based on multiples of the company’s previous year revenues and previous year EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). On the surface it seemed like a reasonable offer and our client was pleased. Luckily our client hired us to take a closer look. After considering the future impact of large contracts that had recently been landed, we found the value of the business to be significantly higher than the original offer. Because these new contracts would radically increase future revenues and profits, it did not make sense to sell the business based on a multiple of historical sales or historical profits. Without going through the process of obtaining a business valuation, our client would have left a lot of money on the table.
In addition to valuation services, Corrigan Krause offers tax and consulting guidance from experienced professionals to help business owners navigate sale negotiations and tax implications. If you are a small business owner looking to sell your company, be sure to hire qualified professionals to help you navigate the transaction. Selling a family-owned business is likely the most important transaction of an entrepreneur’s life, and it should not be done without all of the facts and information to make an informed and intelligent decision.